Local exporters are expected to access more credit after the Rwanda’s Export growth facility received a financial support amounting to EUR 8.5 million which will be boost the export sector.
The funding has been made available by the Government of the Federal Republic of Germany, through the Ministry of Finance, the Development Bank of Rwanda (BRD), and KfW Development Bank (KfW).
Rwanda currently faces an uphill task to grow its exports and reverse the widening trade deficit, which if not checked is likely to hamper government from achieving the set 28 per cent export growth target in EDPRS2 by 2018.
The money, provided under the Export Growth Facility, launched today, will focus on the expansion of their business with the overall target to enter new export markets in the region and beyond.
The facility is aimed at fast-tracking export growth through solving the challenge of access to finance and high interests that have as well as augment exporters’ ability to compete successfully on the international market and ultimately enhance the country’s export earnings.
The signing event took place at the Marriott Hotel in the presence of the Minister of Finance and Economic Planning Amb. Claver Gatete, who said that negotiations for these funds has been crucial to Rwanda.
“I couldn’t wait to see the signing of the funds and I came here to personally witness .This fund is very important to realizing our export targets” Gatete said.
KfW’s support will focus on the funding component and KfW has extended a credit line to BRD in order to provide sustainable and tailored financial services for Rwandan small and medium size enterprises (SME’s).
This may look as if commercial banks will be put ‘out of businesses but according to the Director of the KfW Office Kigali, Markus Bär, this shouldn’t worry anyone.
This is not a competition with commercial banks on loan schemes. All we are doing is to enable the SME’s to be able to work effectively so that they can do business with banks” Bär said.
Data released by the National Institute of Statistics of Rwanda (NISR) in the third quarter of 2015, indicates that the country exported goods to a tune of $ 96.14 million, imports totaled $ 481.10 million while re-exports were valued at $ 46.01 million.
Much as the country registered a 0.3 per cent increase in its total trade, to $623.25 million, the difference between exports and imports remained wide.
Although some exporters have in the past benefited from loan products obtained from commercial banks to finance their export businesses, in tea, coffee, tourism and mineral exports, among other, it has been done on a client per client basis, and there has been a costly absence of a targeted financing system for export trade, a gap which the EGF facility comes to fill.
Alex Kanyankole, the Chief Executive Officer of BRD, said that these funds will boost the existing Export Growth Fund which aims at increasing the external connectivity of Rwanda’s economy and boosting exports is a key priority of EDPRS 2 and a powerful tool to spur economic growth, raise living standards and reduce poverty.
The facility targets exporters including SME’s, who export up to 40 per cent of their production, with a turnover ranging between, $50,000 to $1million.
“This money will be distributed into commercial banks to support export projects. We already have some funds (EGF) from last year, and the government has added Rwf1.5billion to this project” Kanyankole said.
The EGF facility is designed as a single facility with three separate windows, an investment catalyst fund, a matching grant fund for market entry related costs and an export guarantee facility. These were developed to respond to exporter’s most pressing financing bottlenecks.