Access to finance for companies of stone and clay value chains

Project Description

The Belgian Development Agency (Enabel) is supporting the Rwandan government from 2019 to 2024 with an Urban Economic Development Intervention (UEDi) aimed at supporting the market for locally produced construction materials. Limited access to finance is a barrier to growth, although it is essential for companies’ ambition to invest in modern production technologies. The cost of finance, with an interest rate of 21%, and the strict collateral and administration requirements are a challenge for many businesses. The process of acquiring loans is lengthy, requires collateral and is expensive (both in terms of the cost of financing and the administrative cost of the process).

In this context UEDi aims to support sustainable access to credit. The intervention therefore proposes to work with BRD who will work with banks and/or microfinance institutions to reduce the cost of credit and thus facilitate access to finance. The facility will be limited to private enterprises operating in stone and clay value chains. In the framework of this project, Azimut inclusive finance has carried out a short study, aimed at conducting an access to finance needs’ analysis for companies of stone and clay value chains. The study also explored the relevance and feasibility of the facility proposed with BRD and provided recommendations on its design and implementations phases.

The activities carried out involve

• Interviews with key financial institutions (commercial banks, MFIs and guarantee funds) to assess their level of adherence to the proposed BRD mechanism.
• Interviews with sample of private sector enterprises to determine what type of financing they need (loans, guarantees, grants, etc.), for what purpose (e.g. working capital, access to technology, etc.) and what problems the enterprises face in accessing financing.
• Provision of recommendations on the budget to be allocated to this activity depending on the absorption capacity of the target groups and the duration of the intervention. Review of best practices from similar projects
• Provision of an analysis of how the planned access to finance activity complements the existing private sector support (BDS and access to technology) that the intervention provides
• Provision of alternatives and potential modifications to the proposed access to finance model.

Submission of a study report to ENABEL Rwanda.