Africa-Press – Uganda. Micro, small and medium enterprises (MSMEs), which were the biggest segment of the economy that deserved some relief to stay afloat in the last 13 months, were either excluded or handed a “ghost” deal, an analysis of the stimulus package has revealed .
A scrutiny by organisations SEATINI-Uganda, OXFAM, Argidius and the Federation for Small and Medium Enterprises shows that disbursement and management of the funds government allocated to the stimulus package has largely not served its intended purpose, with the biggest culprit being MSMEs.
This segment comprises more than 90 per cent of the country’s private sector, making it the largest employer in the country.Following pressure from several quarters, in April 2020, government established an economic stimulus package to support MSMEs and other business enterprises that were drained by the negative effects of Covid-19.
“The government did not start up new programmes, but looked at the already existing ones and recapitalised them with the objective of offsetting the economic impacts that came as a result of the Covid-19 pandemic,” Ms Joanita Nassuna, a researcher, told journalists in Kampala yesterday.
“It is now 13 months since the government issued the stimulus packages to rebuild businesses and the economy from the pandemic-driven crisis. However, these packages have not yet reached the intended beneficiaries, especially the micro and small enterprises yet government, through the Ministry of Finance allocated Shs2.6 trillion as a direct subsidy to entrepreneurs,” Ms Nassuna, who is also the programme assistant in charge of women and economic justice at SEATINI-Uganda, added.
Conditions
The economic stimulus packages were to be accessed in form of loans and grants through three major institutions which include Uganda Development Bank (UDB), Uganda Development Corporation and Microfinance Support Centre to support MSMEs that were out of business or needed to keep afloat.
However, a call for applications issued by UDB earlier this year indicated that the financial facility is not lending out money below Shs100m to enterprises. This remains way above the money MSMEs would regularly borrow.
Other stringent conditions include the demand for feasibility studies or business plans, need to provide a copy of each of the last two years audited/draft accounts (from Institute of Certified Public Accountants of Uganda/Bank of Uganda listed audit firms), security for the proposed loan, including current valuations of the assets all of which MSMEs can hardly conform to.
The bank has also stated that these funds are not meant to support MSMEs or struggling businesses, but for its recapitalisation. It emerged that the loan interest rates at which UDB is disbursing its loans is 14.5 per cent and not 12 per cent, which are almost the same as those of commercial banks.
In addition, engagements with the private sector, including associations such as FSMEs, which constitute more than 100,000 enterprises across the country, have revealed that none of their members have accessed the money even after they applied for it.
The FSME executive director, Mr John Walugembe, called for a review of stimulus packages.He recommended that future disbursement of stimulus packages should be made directly through the business associations whose membership are made of MSMEs.
Wasted funds
The Ministry of Finance through the Microfinance Support Centre disbursed Shs260b to the Emyooga programme. The funds were aimed at providing seed capital to organised special interest groups under the Youth Fund, Women Entrepreneurship Fund and the ‘Emyooga’ Talent Support Scheme.
It is envisaged that the reinforcement of the funds would provide support to the most affected businesses including; boda boda riders, salon operators, bars, nightclubs, women entrepreneurs, taxi operators among others. “Findings from our research reveal that many of them are yet to be offered Certificates of Incorporation from the Ministry of Trade, and also a requirement that the associations need to have saved a substantial amount of money,” Ms Joanita Nassuna said.
