10 Jul 2014

Small and Medium Enterprises (SMEs) will obtain much needed funding from an agreement that was signed on July 8 by the United States of America and Barclays Bank Botswana.

Through the agreement, SMEs would gain access of up to US$15 million, an equivalent of P132 million, in loans.

Speaking at the signing ceremony, the charge’d’affaires at the US Embassy, Mr Michael Murphy said the agreement was aimed at benefitting SMEs in Botswana.

He expressed hope that the P132 million would catapult Botswana’s undercapitalised and fledging SME sector into a thriving and dynamic player in the national economy.

“It is clear that Botswana needs new sources of jobs and growth as it relies upon diamond revenues for as much as a third of government revenues. This is ultimately unsustainable and the country must radically reform and diversify its economy,” he said.

Mr Murphy commended government for trying to rectify the problem and diversify the economy, as evidenced by its efforts in the last three National Development Plans, the SME policy of 1999, the Excellence Strategy of 2008 and many other strategies and policies.

He added that Botswana’s population of two-million is too small to create a consumption-driven economy, but could develop additional export-ready businesses that would help the country avoid a painful economic contraction if either diamond or SACU revenues weaken significantly.

“Botswana has a stable political system and an independent judiciary. It traditionally had good physical infrastructure and its central bank has performed admirably over the years. The country’s strong financial management has ensured that its sovereign debt rating has stayed at investment grade,” said Mr Murphy.

However, despite the excellent environment, the country’s SMEs have found very difficult to access credit.

He said banks in Botswana have not traditionally loaned to SMEs because of their risk profile, which has resulted in most borrowers being frozen out of the market due to high collateral requirements or short loan terms. Such a scenario, said Mr Murphy, is precisely the opposite of what Botswana’s economy needs and it must change.

 He added that the SME sector will over the next several decades form the laboratory in which the future of Botswana’s economy will be forged.

“Partnership between the US government and Barclays Bank to provide a risk-sharing agreement are meant to unlock financing for entrepreneurs and SMEs. This credit programme will apply to a portfolio of loans that Barclays Bank makes in the SME sector and will be worth P132 million over seven years,” said Mr Murphy.

He further explained that the programme will target 10 per cent of the loan portfolio to support larger-scale programmes in the health sector. ENDS