Following the outbreak of the Covid 19 pandemic, Bank of Uganda asked commercial banks to grant loan holidays (Loan restructuring) to borrowers.
However, according to the Federation of Small and Medium Enterprises Uganda (FSME), most of the small businesses (58.9%) that applied for the renegotiation of their loans in the past six months were rejected by the banks.
“Only 27.6% of those who applied benefitted from the loan restructuring while 13.5% of those that are applied are waiting for a response. We believe the reason the banks refused to restructure these loans are because of the mistrust they have in the borrowers and of course they also want to make money since they are businesses,” John Walugembe, the FSME executive director said
Walugembe was speaking at the release of the Annual MSME competitiveness report 2020 that took place at the Forum’s head office in Kampala.
The annual report provides insights into a range of issues and challenges facing Micro-small, small and medium sized enterprises such as the business environment, access to finance, access to markets among others.
According to the report, in 2020, MSME in Uganda were faced with some major challenges due to the Covid-19 pandemic. 28% the small businesses that were interviewed said finding customers was a challenge, followed by lack of access to finance (19%), insufficient cash flows (16%), Multiple taxation 12%, regulatory red tape 11.5%, corruption 10% and unskilled labor force 3.5%.
In terms of costs, 27% said the biggest cost they incurred in 2020 was cost of inputs and raw materials, 20.5% said transportation costs, 19.2% said rental costs, 11.7% complained of the high electricity costs 9.5% taxes, 8.1% said cost of capital while 4% mentioned employee costs.
“We believe that the impact that COVID-19 has had on small businesses will last up to 5 years. We want government to put in place favorable measures to help out these small businesses like relief packages, uncostly financial access, tax holidays among others. We also want government to completely open the economy so that bars and schools can also open. If they continue to be closed, most businesses would have closed by 2021,” Walugembe said