Robert Wanok, dfcu Bank’s Head of Personal and Business Banking
SMEs in Uganda face undercapitalization, lack of access to financing, lack of access to markets, stiff competition, and stringent policies that all work together to stall their growth. This is where the role of Financial Institutions becomes integral because they can support SMEs to realize their short and long-term growth targets. Financing options from Banks are able to bridge the gap between SME owners and their goals by offering tailor made financing solutions.
Robert Wanok, dfcu Bank’s Head of Personal and Business Banking shares insights on how SMEs can make use of the financing options available to them.
For Financial Institutions, supporting SMEs to achieve success is of strategic importance because we are aware that they are a key engine to our economic growth, contributing approximately 80% of the manufactured output, 20% to Uganda’s Gross Domestic Product (GDP) and employ over 2,000,000 people in Uganda. Practically, SMEs can take advantage of the following offerings from Banks to drive the growth of their businesses:
Seek out financing options with incentives.
Banks are aware that the cost of credit is prohibitive for many SMEs and yet they need credit facilities to manage costs and also upscale their businesses. Banks such as dfcu have gone ahead to make special considerations that will support SMEs and allow them to easily access credit facilities at different stages of their business cycle.
When looking at options for financing such as business loans, SMEs should look out for Banks that offer incentives such as reduced or waived Arrangement Fees. These incentives ultimately lower the cost of borrowing and make the repayment of loans less cumbersome.
Additionally, take the time to understand how your business performance can help you acquire the most optimal credit facilities. For instance, Banks are able to provide loans that are tiered according to business turnover – and meeting this threshold will ease the process of acquisition of credit facilities for your SME.
Take Advantage of Product Segmentation
Many SMEs are owned by groups that are traditionally marginalized and face even more challenges while operating their businesses. Women and youth-led SMEs in particular have to deal with several barriers that cause many of them to abandon their entrepreneurship dreams. While identifying financial partners, these special groups should look out for organizations that have created specific products for each of their customer segments.
Segmentation of products and services allows unique customer needs to be met, something generalized products are not able to achieve.
An example of how dfcu Bank supports women entrepreneurs is through our Women in Business Proposition which was created to strengthen and motivate women running SMEs in Uganda.
As an SME, identifying a financial partner who contributes to the levelling of the business landscape and thus, offers you fair competition, is important in navigating systemic hurdles.
Utilize Sectoral Support
Small and Medium Enterprises operate across a myriad of sectors including, Trade and Services, Agriculture, Education, Health, Real Estate, Transport, Manufacturing, Hotels, Leisure & Hospitality, and many more. SME owners must learn to identify and take advantage of seasonal and sectoral-based offers such as reduced lending rates, which ultimately allow them to make a saving in the cost of running their businesses.
To support the Education Sector, many Banks will offer products such as Unsecured Temporary Overdrafts at the start of new school terms. These offers allow school owners to afford the necessities required early in the academic term, making it easy to manage costs such as payment of salaries, utility bills and much more.
Offerings on Asset Financing are important to players in the Agricultural sector and Agro-processing businesses, and business owners can make use of them to make investment into assets and charging acquire working capital finance.
This sector-based support allows SMEs to receive specialized financing because these offers have been packaged to meet the needs of each segment at each stage of its value chain.
Overall, for Small and Medium Enterprises to operate optimally and earn success, they need identify the right Financial partner who is as equally committed to the transformation of their business.
The author is the Head of Personal and Business Banking at dfcu Bank.