Access to funding a major challenge
20 May, 2022, 6:15 pm
One of the major issues over the past years SMEs or micro small businesses were faced with was access to funding or credit.
The Reserve Bank of Fiji governor Ariff Ali, during their submissions to the Standing Committee on Public Accounts on the compliance audits relating to Micro, Small and Medium Enterprises Credit Guarantee Scheme, said businesses did not have this access simply because they did not have their audited financial accounts or collateral, making it difficult for them to go and borrow.
He said without the MSME Credit Guarantee Scheme a lot of these businesses would not have been able to access the loan.
“Over the last 10 years or so I’m pleased to say and this is how effective this facility is, the total amount that we’ve paid, it’s about $300,000,” said Mr Ali.
“The total loan Government has given under this facility is in hundreds, if you combine all the things, so the loss ratio is very low.”
He said accessing the loans meant these businesses would be able to contribute to the economy.
“If I look at $100 million loan given, its contribution to GDP and taxes far more outweighs that total guarantee that we’ve paid.
“A number of times we have reviewed this facility to increase the guarantee and we’ve now added women in particular, in rural areas and the guarantee now has increased from 50 per cent to about 75 per cent.”
He said the total initiatives of facilities which the Reserve Bank operated in terms of the total funds they lent out were about a $1 billion.
“The SME Credit Guarantee Scheme or scheme that was announced in the last budget, to date, we have approved somewhere around 5500 loans under this facility.
“Of these micro businesses account for about 2581 or 47 per cent of all businesses that access this facility where government will pay interest for the first two years, there’s no fees, no repayment. Small businesses accounted for 1007 according to Mr Ali.
“So when you combine micro and small, that’s somewhere around almost 78 per cent, more than two thirds.
“That’s a quite a large number that again, shows why we need to support the SME sector.”
Mr Ali said their Disaster Risk Facility, lent a total of about $350m to about 300 customers and their Import Substitution and Export Finance facility included 281 companies, with a total amount under this facility being $500m.
“So we manage a loan portfolio, normally most central banks don’t do that. ”
So a total pool of almost a billion dollars of loans to somewhere around 6000 customers,” he said.