Through the Public Financial Management, Private, and Financial Sector Consultant Program in Uganda, IDG supported the efforts of USAID in introducing new financially viable vehicles to facilitate economic growth in partnership with the Government of Uganda (GOU).
Despite high demand for finance from micro-, small-, and medium-sized enterprises (MSMEs), access to MSME finance has remained low due to conservative lending practices of regulated commercial banks. These banks typically did not lend to the MSMEs on a scale that could increase broad based economic growth, create jobs, and improve livelihoods and health outcomes. The lending that reached these entities often came with high interest rates, short loan tenors and prohibitive collateral requirements. USAID’s interventions in Uganda were targeted toward modifying and developing the existing lending practices to boost economic growth.
The objectives of IDG’s assessment were to:
IDG considered several issues, including USAID’s activity portfolio, creating a network of community-level knowledge workers, building a common platform to support entrepreneurship and access to finance, launching an agriculture-bond, linking Feed-the-Future and Power Africa, commercial bank lending, value chain businesses as financing providers, leasing, new financial products, mobile financial services, and financial-sector supervision. IDG provided recommendations to the Mission on ways to strengthen current systems and explore future efforts.
The projects assessment found many areas of the financial sector that if USAID supported reforms or initiatives in that area, access to financing for micro-, small-, and medium-sized enterprises (MSMEs) could increase. These include; he development of a national platform to support entrepreneurs and access to finance, aBi’s efforts to market a $5 million Agro-Bond in Uganda, Assist banks to restructure their lending processes to shift from a collateral to a cash-flow/risk focus, and to target rural borrowers, including by partnering with CKWs and other external agents, financing for input sellers, agro-processors, traders, and renewable energy suppliers so they in turn can provide financing to small farmers, creating a network of community-level knowledge workers, work with banks and non-banks to develop new financial products aimed particularly at SMEs and the rural economy, and many others. The goal of this project was to assess how the current barriers and ow to increase access to financing for micro-, small-, and medium-sized enterprises (MSMEs). IDG provided recommendations to the USAID Mission on ways to strengthen current systems and explore future efforts including launching an agriculture-bond, linking Feed-the-Future and Power Africa, commercial bank lending, value chain businesses as financing providers, leasing, new financial products, mobile financial services, and financial-sector supervision. Despite high demand for finance from micro-, small-, and medium-sized enterprises (MSMEs), access to MSME finance remains low due to conservative lending practices of regulated commercial banks. The 32 Banks regulated by the Central Bank of Uganda do not offer loans accessible to MSMEs, IDGs analysis found that to remedy these conservative lending practices, USAID could review banking law and central bank regulations to identify and eliminate any impediments to sound rural lending and assist the Bank of Uganda in better implementing risk-based supervision.Areas of Expertise
Financial Sector
Access to Finance/Microfinance
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