Bank of Kigali (BK) and Business Development Fund (BDF) Sign RWF 30 Billion SMEs Derisking Partnership

By The Inspirer.

On December 27, 2023, Bank of Kigali (BK) and the Business Development Fund (BDF) officially entered into a strategic partnership aimed at boosting Micro, Small, and Medium Enterprises (MSMEs) in Rwanda.

The partnership, signed by the CEOs of both institutions, Dr. Diane Karusisi (BK) and Vincent Munyeshyaka (BDF), is designed to facilitate easier access to finance for MSMEs, with a significant percentage of risks covered.

The partnership aims to derisk up to RWF 30 billion in individual SME loans offered by Bank of Kigali. This means that MSMEs can obtain loans from the bank, and BDF will derisk the banks, covering a substantial portion of the loan risks—ranging from 50% to 75% of the risk of the loan received from the bank.

BK CEO Dr. Diane Karusisi highlighted the bank’s three-year commitment to the SMEs strategy and the establishment of an SMEs Center to support clients in this sector. The partnership is expected to enhance BK’s strategy to financially empower SMEs, particularly in diversifying its portfolio.

Dr. Karusisi expressed the significance of the partnership in diversifying BK’s portfolio, especially into the small and medium segments. The guarantee provided by BDF is expected to boost the bank’s appetite for SMEs, contributing to economic development.

Vincent Munyeshyaka, CEO of BDF, reiterated the fund’s core mandate to support SME sector development in Rwanda through improved access to finance. The partnership with BK is seen as a significant step towards achieving BDF’s five-year strategy.

Medium-Term Solution

The partnership agreement is considered a medium-term solution to support individual businesses, with future plans to venture into portfolio guarantee financial derisking. The wider plan includes collaboration with key banks to pilot the portfolio guarantee, where bulk funding is derisked to a group of SMEs rather than an individual.

Starting January 2024, BDF will have a World Bank technical advisor to assist in building the portfolio guarantee service, avoiding individual risk assessment and functioning as underwriters, similar to insurance companies, in assessing collective loans.

BDF has set a target of de-risking MSMEs with at least RWF 10 billion per year, aiming to significantly increase access to MSME loans.

The partnership signifies a crucial step in supporting and empowering the backbone of Rwanda’s economy—Micro, Small, and Medium Enterprises—further contributing to the nation’s economic development.

theinspirerpublications@gmail.com