Rédaction Africa Links 24 with Uganda Monitor
Published on 2024-03-15 04:01:27
Reports have surfaced indicating that billions of shillings intended for businesses struggling with financial distress post-Covid-19 remain unutilised in the vaults of commercial banks. This revelation comes as a costly blow to businesses that were counting on the funds to weather the economic challenges brought on by the pandemic.
In November 2021, the government unveiled a much-anticipated Shs200 billion stimulus package aimed at assisting businesses facing insolvency due to Covid-19 lockdowns. The package was designed to benefit businesses with 5-49 employees and an annual turnover ranging from Shs10 million to Shs100 million.
The funds were to be disbursed through the Uganda Development Bank, with selected commercial banks and micro-finance deposit-taking institutions tasked with distributing the funds to small businesses at subsidized interest rates. The government was set to provide an initial deposit of Shs100 billion, with participating financial institutions matching that amount to create a consortium pool of Shs200 billion.
Despite the promising launch of the Small Business Recovery Fund (SBRF), a significant portion of the allocated funds remains unused. This has led to the closure of many businesses that were counting on the financial support to survive the aftermath of the pandemic. The inaction of participating financial institutions has raised concerns of potential economic sabotage.
Richard Byarugaba, the executive director for finance at the Bank of Uganda overseeing the SBRF, has acknowledged the sluggish disbursement of funds. He admitted that commercial banks were not providing the much-needed funds to businesses in a timely manner, but assured that efforts were being made to address the issue.
Two theories have emerged to explain the delays in fund disbursement by commercial banks. One theory suggests that banks are holding onto the funds for their own benefit, given the favorable terms of the loans, including a low interest rate of 10% charged only on the government component. The other theory posits that banks are investing the funds in safer avenues like treasury bills and bonds to maximize returns.
While the Bank of Uganda has pledged to investigate the stalled disbursement of the SBRF funds, calls have been made for a thorough forensic audit to hold accountable those responsible for the apparent mismanagement of the funds. The business community eagerly awaits a resolution to ensure that the much-needed financial support reaches those in need.
In conclusion, the underutilization of the SBRF funds highlights a significant failure in the financial support system for businesses in Uganda. Addressing this issue is crucial to prevent further economic hardship for businesses struggling to recover from the impact of the pandemic.
Read the original article on Uganda Monitor
