Government will soon recapitalise and relaunch its Small Scale Enterprise Loan Guarantee Scheme (SSELGS) to ensure that SMEs have easier access to finance.
During a public lecture on ‘SMEs and Industrialisation: Materialising SDGs 8 & 9 in Eswatini’, SME Unit Director Mluleki Dlamini noted that government has a loan guarantee scheme to address the problem of lack of funding for SMEs in Eswatini. He explained that the scheme is currently capped at E500,000, which means businesses can get a guarantee for a loan up to that amount and the provision is that government only guarantees 95 percent of the loan.
The lecture, which was hosted by the Eswatini Economic Policy Analysis and Research Centre (ESEPARC) in partnership with the Ministry of Commerce, Industry and Trade (SME Unit) and support from the United Nations Development Programme (UNDP) in Eswatini, was held last Thursday (January 17) at Happy Valley Hotel.
The director stated that the lending financial institutions conduct the required screening and emphasised that the business should be viable and sustainable to be eligible for guarantee under the scheme.
He however lamented the low intake of the scheme, adding that government has had discussions with the financial institutions and the Central Bank of Eswatini, and a decision has been made to relaunch and recapitalise the scheme as well as to market it properly because seemingly there are challenges that government needs to understand and address to ensure that the scheme performs the function for which it was intended, so as to spur economic growth.
Dlamini added that there are also plans to expand the facility so that it does not only cover banks (as is currently being done) but also includes government financial development institutions such as the Eswatini Development Finance Corporation (FINCORP) and the National Industrial Development Corporation of Eswatini (NIDCS).
It is worth noting that ESEPARC recently conducted a study on the ‘Economic Impact Analysis of Credit Guarantee Schemes in Eswatini: A Case of the Small Scale Enterprise Loan Guarantee Scheme (SSELGS)’, which has been completed and is currently being finalised.
Meanwhile, a participant at the lecture noted that bureaucracy is also a hindrance of growth for SMEs as there is a lot of regulation in the sector, which leads to many such enterprises operating in the informal sector. According to the MSME Survey 2017, there are 44, 518 unregistered micro, small and medium enterprises in Eswatini, which accounts for 75% of the total MSMEs in the country.
Another attendee suggested that the SME Unit should also push for deregulation in the industry, as well as SME focused incentives and rural finance, which could help address the issue of formalisation in the sector. He said sometimes the policies that government puts into place are a stumbling block for innovation in the SME sector.
In this regard, the director acknowledged that there is a need for the formalisation of these businesses, as well as the clustering of small-scale businesses to exploit market access opportunities. He further noted that there is a lack of recognition of this sector in terms of its economic importance, which needs to change. He also acknowledged that government still has more to do in terms of encouraging the inclusion of women, the youth, and disadvantaged population in entrepreneurship.