Financing mechanisms hampering service sector growth

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Financing mechanisms hampering service sector growth

Lack of mechanism through which the service sector can access finance is seen as a challenge   hampering the sector’s growth.

The service sector which now contributes around 46 percent to the country’s GDP needs affordable means to access to finance where they leverage capital to pump into their businesses to bolster their production.

But the current opportunities to accessing   finance, according to financial experts are either   are expensive in terms of interest returns or cannot be accessed by the sector, something   that calls for intervention.

“So the service sector requires financing that is tailored to their needs and the environment they are operating in to help them increase their competitiveness,” said Hubert Ruzibiza,Head of Services Development of the Rwanda Development Board-RDB

While speaking at   the two day Services Investment Forum-SIF in Kigali on Monday, Ruzibiza noted there is optimism for the sector to contribute  over 55 percent to GDP by 2020 if the current  challenges of finance and skills are addressed.

The forum brings together local and regional ministers and policy makers, senior leaders from the continent, including EAC, COMESA & SADC, and senior representatives from Investment promotion agencies, international business leaders with current and potential investment in Rwanda.

Although it is only tourism in the service sector that is budding, accessing   affordable and easier financing would help other sub sectors boost their growth to help government offset the   trade deficit.

Since most the   business projects   in the sector are knowledge based, Ruzibiza says it is always hard for financial institutions to finance them since they are   at a stage where there still a perceived high risk.

The country’s service sector includes tourism, education-BPO,ICT, healthcare services, logistics, finance sector, creative industry which is compared mainly of SMEs or startups businesses and are looked at to leapfrog the country into a service hub.

“It means that there is need to broaden financing mechanisms to help even startups to access finance,’ Ruzibiza added

“We are looking at   different   options of how we can help the service sector access finance,” noted Francois Kanimba, Minister of trade and Industry

Among these, Minister says, will  involve  attracting Small land Medium enterprises-SMEs to  stock  markets  where they can access  low  interest  financing  as well as  several funds  the government  is  set up to ease  financing.

Currently, the government is finalizing the   export guarantee fund that will see businesses involved in export access funds to finance their activities easier, a move to increase export competiveness of the   exporters.

KondeBugingo, Chief Executive Officer, Rwanda Development Bank commercial /Atlas Mara group, Rwanda says that tapping it not cloud  funding  would help provide  cheaper financing for the sector.

“If businesses bring together their excess finances in a pool, it can be a great source of financing,” he said

John Vitalo, CEO Atlas Mara Co-Nvest Limited, believes that through several financing mechanisms that are put in place; the country is on track to become bot the region’s service and financial hub.

“Rwanda is well-positioned as an important financial services hub,” he said adding that, “ Rwanda has been an exemplar of the economic possibilities of Sub-Saharan Africa and BRD has been a key part of that growth.”

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About the author

Olive Ndaka is the Junior Editor for RwandaEye. An investor and young entrepreneur, she is a quick learner and has contributed many articles for RwandaEye in Kinyarwanda.

More posts by | Visit the site of Ndaka

 

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