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Ugandan SMEs get shs1.8Bn financing boost

Ivan Mandela and Simon Mwebaza signing a UGX 1.84Bn partnership agreement. PHOTO URN

KAMPALA, UGANDA | THE INDEPENDENT | SHONA Capital, a Ugandan small and medium support investment firm, has secured 1.84 Billion Shillings to support SMEs with high potential to grow and flourish.

The money was mobilised under a partnership with Cornerstone Asset Managers, from high-net-worth individuals with the idea to support high-growth Small and Medium Enterprises (SMEs) in Uganda with the capital they need to flourish.

The investment is guaranteed by Kuo Sharper Initiative, highlighting the collaborative effort to support local Ugandan businesses. Kuo Sharper Initiative LLC (KSI) is a purpose-driven company, founded with a mission to accelerate job creation and economic prosperity in the African Continent.

By directing capital from high-net-worth individuals and institutions into SMEs, the partnership seeks to mitigate risks associated with hard currency-denominated funding and establish a sustainable growth model.

SHONA Capital offers flexible debt financing to Small and Medium Enterprises (SMEs) to optimize growth and support local economies through job creation.

With a focus on agriculture and healthcare, this financing is complemented by practical business management support from a pool of industry and domain experts.

On the other hand, Cornerstone Asset Managers offers a broad array of investment solutions, comprising wealth management, income unit trusts, cash management, and investment advisory services, catering to both individual and institutional clients.

Despite SMEs contributing approximately 80 percent to Uganda’s GDP and employing the majority of the workforce, access to funding remains a significant challenge.

A 2021 report by the World Bank estimated that the finance gap for SMEs in Uganda was roughly 4.7 Billion Dollars (approximately 17.219 Trillion Shillings), indicating a considerable unmet need.

Shona Capital says that by mobilizing local capital, the two companies are providing more reliable and sustainable funding sources for local entrepreneurs to scale, and create jobs, thereby strengthening the national economy.

“Investing in our own SMEs is the best way to ensure long-term, sustainable prosperity. It is also a call to action for other local institutions – pension funds, fund managers, and high-net-worth individuals – to recognize the immense potential within our own borders,” said Ivan Mandela, CEO of SHONA Capital.

This, he says, demonstrates commitment and support for the “Buy Uganda Build Uganda” government policy.

Although lending to SMEs by commercial banks has risen, many SMEs still face difficulties in obtaining formal financing.

On their part, Cornerstone says it is is dedicated to fostering the growth of the Ugandan economy, recognising the vital role that SMEs play in the economy of Uganda.

“By partnering with SHONA Capital, who have a proven track record and a profound understanding of the local market, this aligns with our role in the government’s tenfold growth strategy, as we are able to effectively allocate capital where it can make the most significant impact,” says Simon Mwebaze, the Managing Director.

He expresses confidence that this investment will yield both financial returns and positive social outcomes as it offers a more stable, long-term solution to Uganda’s SME financing challenges.

While Uganda’s private equity and venture capital sectors are growing, they still lag behind their regional counterparts.

Historically, many SMEs have relied on foreign capital, exposing them to currency fluctuations and external shocks.

Under the partnership, the two plan to continue exploring further opportunities to collaborate and mobilize local capital for Ugandan SMEs, building on the momentum created by this initial investment.

SHONA Capital offers flexible debt to East Africa’s SMEs which helps them grow and achieve their full potential.

Its financing is combined with hands-on business management support from their officials and preselected industry experts, experienced entrepreneurs, and others.

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