SME companies are imperative for growth, jobs and economic development in Rwanda. But the country’s SME sector suffers from a significant funding gap of more than USD one billion. High collateral requirements of up to 120 % is a main barrier for SMEs to obtain bank loans despite banks in Rwanda being highly liquid and adequately capitalised.
To assist in bridging the financing gap, IFU has issued a guarantee to BPR Bank Rwanda that will substitute part of the collateral required by the bank with a Danish government guarantee. This will allow BPR Bank Rwanda to increase their lending to SME companies due to lower risk on their portfolio.
“In many African countries, SME companies are the backbone of the economy and the most significant job creators. But often these companies don’t have access to loan financing even though capital is available. With this guarantee we are unlocking more risk capital to these smaller companies and thereby improving their ability to prosper,” said Magnus Cedergren, Head of Guarantee Facility in IFU.
BPR Bank Rwanda is the second largest bank in Rwanda and has strong focus on SME lending with a network of close to 40,000 depositing SME clients. But less than 10 % of these SMEs are also borrowing clients, indicating a high potential for additional lending under a guarantee.
Unlocking USD 8 million in additional capital
The total guarantee is USD 5.6 million, and it covers 70 % of the bank’s risk on its SME lending. It is expected that the guarantee will unlock USD 8 million in additional capital for the SME sector in Rwanda. The guarantee covers lending to a broad range of sectors with a focus on lending for green and renewable investments as well as women and youth-led companies.
The official launch event, held at BPR Bank’s headquarters, featured prominent attendees, including BPR Bank’s Managing Director Patience Mutesi, Jean Bosco Iyacu, CEO of AFR, Mr. Ole Thonke, Deputy Secretary of State for Development Policy at Denmark’s Ministry of Foreign Affairs and Signe Winding Albjerg, Danish Ambassador to Uganda
“With up to 70% guarantee coverage, we’re making it easier for local businesses to access financing, foster growth, and create jobs, thus contributing to sustainable economic development across Rwanda,” said Patience Mutesi.
“This collaboration shows the power of private sector partnerships to advance Rwanda’s development goals. By supporting MSMEs, we are investing in the country’s future and creating opportunities for local communities,” said Ole Thonke.
The deal also includes a technical assistance grant financed by the Danish Ministry of Foreign Affairs. The technical assistance will be provided by Access to Finance Rwanda and support SMEs in developing business plans and assist the bank in developing new financial products to meet the needs in the SME sector in Rwanda.