Which SMEs have accessed COVID-19 stimulus package?

Many have attempted to apply for the funds but failed to get it

Kampala, Uganda | JULIUS BUSINGE | Lilian Alinda is the proprietor for a two-year old company, Moment Fashions & Films Limited located in Kayunga along Gayaza Road.

When government announced a total national lockdown in March last year due to COVID-19, she sent home all her 25 workers hoping to hire them back.

However, she eventually hired back only three of the workers as business was slow due to the coronavirus pandemic.

However, Alinda says she gained hope the moment the government announced a stimulus package for businesses in the FY2020/21 national budget.

She later went to Uganda Development Bank (UDB) to seek credit support to recapitalise her small but promising business.

Government said it would inject slightly over Shs1trillion in UDB to be accessed by struggling firms at an interest rate of 12%.

On reaching at UDB, Alinda says she was referred to Postbank – which disburses some of the money on its behalf. She only wanted Shs25million.

However,  the bank executives  told her that one of the conditions to access the stimulus package funds was that she needed to borrow a minimum of Shs100million and stake collateral that is above that amount.

“I left and have never returned,” she said, adding that her business cannot expand because it now lacks capital.

Alinda’s predicament, is among the many that came up during a meeting for micro, small and medium enterprises organised by Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) in Kampala on March 04.

The meeting aimed at collecting experiences of businesses that have attempted to go for credit support under the government COVID-19 stimulus package.

It also aimed at influencing the post COVID-19 economic policy reforms to build back better the economy.

A total of 40 representatives from different businesses attended the meeting but none of them testified having received funding from UDB under this package.

Those that have attempted to go to UDB, they have been given a list of terms and conditions for borrowing the money, which, like Alinda, have pushed them away.

Other participants said, disbursing the funds under this package should be decentralised given that UDB is largely based in Kampala and not in other remote districts.

Others said, the package was only read in the budget to mobilise political support for the current regime during the just concluded general elections.

Some said, there is a lot of bureaucracy, corruption, incompetence among government officials, and the lack of on the ground information by the government when it comes to designing such programmes.

“We may not practically get this stimulus package,” said one of the participants from Gulu, “those that will be lucky will get it.”

John Walugembe, the executive director for Federation of SMEs Uganda said, he has held three meetings with UDB top officials including the CEO but has failed to get an answer on how much government has injected in the development bank and how much the latter has disbursed to the potential businesses under the package.

“It is okay not to have a stimulus,” he said. “Let us not try to sell something that is not a stimulus,” he added.

In an interview with The Independent in October last year, Moses Kaggwa, the acting director for economic affairs at the Ministry of Finance Planning and Economic Development said government had so far injected Shs455bn in UDB specifically to support the private sector access affordable credit in line with government’s COVID-19 recovery programme.

When contacted, Patricia Ojangole, the chief executive officer for UDB, without specifics, said, they were recording and processing more loan applications than ever before since June last year – pointing to the fact there was high appetite for cheaper credit from firms trying to recover from COVID-19 crisis.

Going forward, Walugembe said “government needs to walk the talk” by using effective government institutions to support businesses.

He said, the package needs to be rethought in that the vehicle (UDB) used at the moment may not be the suitable one given that UDB has no countrywide reach.

“What should not be done is to politicize; we must have a vehicle where people are assisted on merit,” he said. He also said that tough restrictions on access to finances of this nature are okay for as long as the government identifies the right beneficiaries.

“There is no business that will misuse money when it wants to become profitable,” he said.

Immaculate Ndagire, a programme officer for agricultural trade for rural transformation at SEATINI said, part of the issues they will document and present before UDB and the ministry of finance will include the need to lower the maximum loan amount given out to qualifying applicants; reduce the 12% annual interest rate on this credit and, one regarding the issue of collateral that applicants have to stake to UDB.

In Uganda, according to Uganda Investment Authority, a micro enterprise is one employing up to four people, with an annual sales/revenue turnover or total assets not exceeding Shs10million. On the other hand, small enterprises employ between five and 49 and have total assets between Shs10million and not exceeding Shs100million.

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