Dfcu Bank unveils ‘Baraka’ Product for SMEs

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Despite being ranked one of the most innovative country in the world, Uganda’s small and medium-sized businesses do not live to see their fifth birthday largely as a result of a lack of financing, poor record-keeping among others.

In an effort to mitigate these gaps, Dfcu Bank has unveiled unsecured loans to support SMEs dubbed Baraka Loans enable entrepreneurs to get access to credit. Unsecured loans refer to any type of debt (or general obligation) that is not protected by a guarantor, or collateralized.

Dfcu Bank has set a minimum of sh2 million and maximum of sh30 million for SMEs to borrow under the arrangement and will have a tenor between 1 month and a maximum of 12 months at an interest rate of 2.5% per month.

“SMEs makeup over 70% of the country’s economy and contribute over 20% of our GDP. These Baraka loans will enable SMEs to acquire credit more quickly without having to worry about loan security and property valuations which slow down the process of acquiring a loan.”

Ronald Kasasa, Dfcu Bank’s Head of Business Banking.

The product offer to SMEs comes at a time when several small businesses are undergoing tough times as a result of COVID-19 pandemic. Businesses have had t close shop for months as the government put up measures to stem the spread of COVID-19.

Non-Performing Loans (NPL) increased by sh123b in the quarter ended June 2020 bringing the total NPL to 5.8% or sh894b.

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Paul Lakuma, economist and research fellow at the Economic Policy Research Center (EPRC) said most businesses are unable to meet their loan obligations because of the increased cost of doing business.

“When we interviewed businesses, the overall effect of the COVID-19 measures is that businesses were doing badly. This affected mostly businesses in agriculture. More than 90% of businesses reported that expenditures went up,” he said.

“Close to four million jobs will be lost temporarily and about 625,000 jobs will be lost permanently. More than 80% of the job losses will be in the services sector,” he added.

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