Rwanda will have to dig deeper in its pockets or mobilise more funds from its development partners if it is to establish a functional export credit guarantee scheme, which is needed to plug the financing needs of Rwandan exporters.
The government, in partnership with the Exim Bank of India, is in the initial stages of establishing a credit guarantee scheme that is tailored to the financing needs of local exporters. However, this will require a bigger financial cover than what is available.
The mining sector alone needs between $250 million and $300 million of credit guarantee to service its financing needs.
A feasibility study has indicated that the scheme will require between $8 million $30 million (Rwf22.2 billion) but so far only $134,000 (Rwf1 billion), half of it from the government and the rest from the Development Bank of Rwanda (BRD), is available.
The Cabinet endorsed BRD to manage this scheme, which is an addition to a similar facility, Export Growth Facility (EGF) that is already in place at BRD, with the charged institutions charting a way these two will work together.
For the past few years, the government has been falling short of its target of garnering a 28 per cent export growth.
Part of what has affected export growth is the fact that many of the country’s exporters have been sidelined by financial institutions in getting the credit needed at different phases of their operations.
“We have been trying to grow our exports by 28 per cent,” said Emmanuel Hategeka, the Permanent Secretary in the Ministry of Trade and Commerce. “It has never been achieved the way we want, and export financing has been the key issues, along with others.”
He said in its responsibility to grow the economy the government will do whatever it can and take the necessary risks with the resources available to see that this scheme succeeds.
Exporters have been largely viewed as risky by banks, and those who have managed to get credit have suffered high interest rates charged by financial institutions, which stands between 15 per cent and 20 per cent and higher.
According to Govind Venuprasad, the co-ordinator of the Indian Trade and Investment for Africa (Sita), the technical aisors for this scheme, the premium to get the cover is supposed to be between 0.5 per cent and 1 per cent of the total value of credit an exporter will be applying for. However, Rwanda may decide its own rate.
He added that the premium will be the income of the export credit guarantee and the $30 million guarantee will be the provision to cover the exporters. The premium paid will cover 50 per cent while the provision will cover the rest the scheme will also spread the risk through re-insurance.
The scheme will exclusively cater for financing needs of exporters and will leave out the bottom pyramid members of the export value chain.
“Focus is on the exporters but there is a trickledown effect it will ultimately impact the whole export value chain” said Hategeka.
In an interview, Malik Kalima, the chairman of miners in Rwanda who is also an exporter, said they welcomed the scheme.
SOURCE: THE EAST AFRICAN