Grassroot financial institutions receive funds to on-lend to enterprises to recover from the effects of the COVID-19 pandemic

Six microfinance institutions and SACCOs (Tier III and Tier IV financial institutions) have received funds to lend to enterprises recovering from the effects of the COVID-19 pandemic. This is part of a five-year Micro and Small Enterprise (MSE) Recovery Fund intervention by the Financial Sector Deepening (FSD) Uganda, in partnership with the Mastercard Foundation under the Young Africa Works initiative.

The institutions have operations across the country and are part of the 25 institutions that are expected to reach 50,000 enterprises with loans.

Jointly, the institutions have disbursed UGX 6.43bn to 6,738 MSEs at an average interest rate of 14.8%. So far, the fund has been disbursed to 40% of youth and 55% of women. These funds are being invested in general merchandise, agro products, agriculture, and trade among other businesses. The geographical concentration of lending is highest in the central region at UGX 3.5bn, followed by UGX 1.7bn in the western region.

The fund aims to shorten the recovery process, from the negative effects of the COVID-19 pandemic of youth and women-owned businesses. The fund will directly secure 100,000 at-risk jobs while enabling 150,000 additional opportunities for dignified and fulfilling work for young people.

“This is important because MSMEs are a significant driver of employment in Uganda. According to the Annual Labour Forces Survey 2018/19, more than half of the working population (65%), is employed in the informal sector. When the COVID-19 pandemic struck, Individuals and households that worked for and with MSEs were worst hit. The fund is targeting this sector and as MSEs recover from the effects of the pandemic, young Ugandans will access dignified and fulfilling work,” explains Joseph Lutwama, Director of Programs, Financial sector Deepening Uganda.

MSEs in the program will receive credit worth between UShs100,000 and UShs10 million, which will be delivered through participating microfinance institutions and SACCOs.

In addition to supporting MSEs, the fund will build the resilience of grassroots Financial Service Providers by digitising workflow processes and strengthening their capacity to attract more long-term institutional capital to address shocks and ensure the sustainability of systemic growth.

The recovery fund is being implemented in partnership with ASIGMA, the facility manager, who ensures effective management of the funds. Another partner, gnuGrid Credit Reference Bureau, is providing credit referencing services to support improvements in credit information markets. MicroSave Consulting is handling the monitoring and evaluation aspects of the intervention.

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