Financial institutions have been urged to beef up credit support to Small and Medium Enterprises (SMEs) to fully realize their contribution to economic growth.
The new generation of SMEs is on the up but credit is still tight hence the private sector should come on board to finance SMEs, said Dorcas Makgato-Malesu the Minister of Trade and Industry.
Though SMEs have a vital role in boosting Botswana economy, they suffer from a shortfall of available financing resources, she said, indicating that small and medium-scale projects receive less than 10 per cent of overall credit facilities extended by financial institutions.
“Investment requirements needed by the SMEs should be provided and spearheaded by the private sector through a variety of private lending products or offerings,” she said. They are an important source of employment creation and have always looked to government to provide them with initial start up.
SMEs play a critical role in the country’s economic development activities. Almost 90 percent of registered business in Botswana are comprised of smmes with a GDP contribution of 42 percent in 2008 but has currently fallen down to 38 percent. The sector employs over 300,000 people across the country formally and informally.
Malesu said SMEs play an important role in fostering linkages between large and micro businesses throughout economic value chains. Increasing access to finance, coupled with support services, can help SMEs enhance the productivity and competitiveness of their business, develop new markets, and employ more people.
In the past, SME’s have been viewed by financial institutions as being risky due to the lack of collateral to secure loans. Banks are increasingly recognizing this profitable growth opportunity and are developing more tailored methodologies to serve this important sector. “Banks should become government strategic partners with a view of accelerating the ideals of vision 2016,” she said.
In line with the ongoing drive towards aiding and encouraging SMEs across Botswana, Stanbic Bank launched its new product, the SME Quick loan. The scheme is targeted to assist clients in trade, business services, small scale manufacturing, agro business, and transport and lodges/guest houses.
The Quick loan facility takes into account the fact that SMEs do not have collateral; to secure their loan application request. It removed unnecessary complications and complexities that SMEs hurdle with to access finance.
The sector plays a critical role as a key driver of growth and contributing towards economic diversification. The Quick loan facility crucially lends a hand to businesses to start up their business cycle. The loan scheme is a fast unsecured business loan and takes 3 days to disburse the funds following approval and flexible repayment terms.
Malesu encouraged SMEs to desist from the culture of misuse of funds and mixing business to avoid demoralizing financiers. It is her expectation to see an increase in the participation of SMEs firms in the economy.