‘REVIEW LOAN CREDIT GUARANTEE SCHEME’

MBABANE – The uptake of the Small-Scale Enterprise Loan Guarantee Scheme (SSELGS) has been very low.

This is per the final report of the Financing Model for Micro, Small and Medium-Sized Enterprises (MSMEs) which was launched by the Minister of Commerce, Industry and Trade Manqoba Khumalo at the Hilton Garden Inn in Mbabane. The report is based on a study conducted by Mauritius-born seasoned economist and consultant Vinaye Ancharaz. It is prepared for the United Nations Economic Commission for Africa and the Government of the Kingdom of Eswatini. The SSELGS and the Export Credit Guarantee Schemes (ECGS) have now been in existence for 30 years.  The latter, according to the report, has remained untouched. SSELGS had guaranteed loans in the amount of E111 million as at end of June 2020.  This amounts to a paltry E3.7 million per year on average since the inception of the scheme. The leverage ratio, which should optimally be about five, but currently hovers around one.

It was said that less an a third of MSMEs qualifying for credit   made use of the loan guarantee scheme. “In interviews of the financial institutions and the Central Bank of Eswatini, the government –mandated sole operator of the schemes, suggest several reasons for this state of affairs. Banks are reluctant to use the scheme since they consider the process of recovering bad debts unduly long and burdensome,” highlighted the report. It is recommended that SSELGS must define the eligibility criteria for accessing the scheme in terms of the size of the loans applied for, irrespective of the firm’s size.  There is also a call for government to set up a joint working group comprising senior government officials, managers of both schemes at CBE and representatives from the banking industry, among others, with a view of making them customer-friendly.

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“Both schemes should be housed in and operated by a new institution independently of the central bank and government,” highlighted the report.  Meanwhile, Minister Khumalo said in as much as the business sector was well known for its potential to evolve the economy, Eswatini just like many other developing countries was faced with the challenge of having an effective financing model in order to ensure the MSME financing landscape was enabling enough to have new start-up businesses emerge and existing MSMEs graduate to large businesses. “Many potential MSMEs have raised their concerns with the ministry that the financial products availed in the country are not favourable for MSMEs. It is in this regard that as a ministry we felt that there was a need to diagnose the problem,” said the minister.

In the financing model there are different sources of funding for MSMEs recommended. This is an opportunity for local MSME finance providers to explore or rather establish more financing products for MSMEs to fund their business dreams thus creating an engine of economic growth. “Even though we still need to instil an entrepreneurship culture to our MSMEs, that cannot be achieved without testing different models and see what works for our country,” said the minister. Deepak Shah, on behalf of UN Resident Coordinator said, MSMEs were strong engines of job creation in this decade of accelerated action. “MSMEs, represented by the private sector, have the potential to drive the nation’s economic recovery and address the country’s high unemployment rate which currently sits at 23 per cent among the general population and a significant 47 per cent for youth. “Through the provision of jobs, the private sector has the ability to increase access to formal employment to absorb vulnerable groups such as the rural population, women and young people, who are often the most affected,” he said.

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