EDITORIAL: Make access to recovery fund easier for SMEs

Tuesday December 22 2020

The National Bank of Rwanda (BNR) headquarters in Kigali.


For the larger part of 2020, the coronavirus pandemic has hit the businesses in ways only they can understand. In Rwanda, many small and medium businesses have closed shop.

They have suffered liquidity problems and have tried to solve them by laying off workers, slashing salaries and reducing operations, which in advent has led to increased unemployment.

In a nutshell, they need help to survive. And it is exactly for this reason that the government set up the Economic Recovery Fund to cushion businesses affected by the COVID-19 Pandemic.

On the surface, the recovery fund is a two-year government facility worth $100 million through which businesses can apply for funding.

But if you pull back the curtain a bit, this facility has been affected by all sorts of red tape and eligibility bottlenecks that have made it extremely difficult for businesses in need to access the funds.

This is mainly due to the criteria that require businesses which were hit by 50 percent losses to be the ones able to access the fund. However, most of such businesses have already shut down, which has made uptake of the loan facility very low.


Rwandan businesses that are unfortunately denied this facility are still operating – albeit in pain – but deemed to be not making losses equivalent to 50 percent in order to meet the criteria.

So basically, the low uptake of the recovery fund loans is mostly favourable to businesses that are either closed or too vulnerable to resume operations.

First, the government needs to understand that all businesses have suffered, so it is counterproductive to issue the loans based on who has been hit the most.

The informal sector itself has indicated that workers are highly vulnerable to getting infected as they mostly live and work in congested spaces.

In the medium to long-term, the government must use the fund in a practical way; for example, by giving businesses that want to use it to provide insurance health cover to their employees.

There is a need to understand that for businesses to survive the crisis, they urgently need liquidity support. So turning them away simply because they have not been “hit as bad” is tantamount to asking them to shut down.

Such short-term injections to businesses can be channeled through methods that entrepreneurs already know and trust, without making the process unnecessarily difficult.

This means community-based financial and microfinance institutions should be considered essential services, and provided emergency liquidity, if within regulation.

Businesses also need an intervention that is combined with business training, networking, and a core understanding of innovations on the market that can help them to reduce risk.

It is therefore paramount for the economic recovery fund to be revised in order to be practical during this Covid-19 pandemic.