Most enterprises are choking under the weight of bank loans
Businesses across sectors have sunk under the weight of the coronavirus pandemic, some closing while others being auctioned. Most businesses that have closed had benefitted from bank loans, leaving proprietors choking with huge loans they unable to repay.
Adolph Mutoni took a loan from a Belgian bank, topped up his savings and opened a leisure facility in 2019 called Via Via at a tune of Rwf80million around Kibagabaga-an affluent part of Kigali.
The facility had a children's play area with modern facilities like a bouncing castle, a trampoline and other games; it also boasted of a hotel and restaurant and other recreational services.
All was going well, and within a short time it had become a go-to place for the middle class families, parents taking their kids to play and dine, then the pandemic hit and everything went south from that point on until they closed.
“Business was booming, everyone loved our services but when the pandemic started business started crumbling because we couldn’t get customers anymore, closing was a hard decision but we had to take it,” said Mr Mutoni.
He said they did their best to weather the storm of the first lockdown of March 2020, but the second one, which happened early 2021 did not leave them standing.
“The business was bleeding money yet there was no income coming in, our landlord was inflexible, despite seeing the situation he maintained we paid the $3000 we paid per month, we couldn’t continue” he said.
The business employed 15 full time staff and all these lost their jobs, and the proprietor is still struggling to pay back the loan despite business coming to a stop.
As banks become impatient, some properties that operated rental businesses have been auctioned o , one of these being Omega house in the city centre.
These are just a few of the many businesses that have gone under as the pandemic ravages businesses.
Majority of the businesses that have closed according to the Private Sector Federation (PSF), are micro, small and medium entities that the fact that these businesses had little capital, many could not survive since
they also faced obstacles in accessing relief funds.
In an interview Rwanda Today had with Théoneste Ntagengerwa, he said much as all businesses have been hurt, the degree of impairment has been according to the size of capital and sector they are in.
“The micro, small and medium businesses have faced the brunt of the pandemic, many of those that have closed belong to those categories, businesses owned by women is another category that has been seriously hit” “There some other sectors outside tourism and hospitality that we have discovered have also been strongly hurt for instance transport, individual owners of entertainment and recreational businesses are selling off their equipment and closing, the situation is bad,” said Mr Ntagengerwa.
At the height of business disruption last year, government came up with the Economic Recovery Fund to salvage many of the businesses in select sectors that were going under.
The funds were channelled through various banks, however, many of relatively smaller businesses were not able to access these funds, largely because they couldn’t meet the stringent requirements put in place by the line institutions.
“Some technicalities hindered many of these smaller businesses from accessing these finances, even for the money allocated to these SMEs has not been disbursed,” he said.
Adding that as a way of addressing this bottleneck, PSF is getting support from GIZ, which will serve the purpose of working with these businesses to overcome the technical hindrances to accessing this money.
He said PSF discovered that the businesses involved in cross-border trade have also been strongly hit.
The pains faced by cross-border businesses however predated the coronavirus pandemic, for instance those that plied Rwanda-Uganda trade routes could not continue after the border between the two countries was closed.
Transporters, many of whom had just gotten bank loans to expand their bus fleets, have packed their vehicles for close to a year-yet they have to continue spending on repairs and service, with no end on the horizon for their predicament.