The European Union-EU has given 1.8 Billion Shillings to Uganda's medium
and large enterprises.
At least 220 medium and large scale enterprises have been offered the
financial support to invest in long-term growth or expansion of investment
The funds under the project dubbed Deal Flow Facility were secured
by the Financial Sector Deepening Uganda, FSDU, a financial think-tank in
Uganda, to increase investment in medium to large companies in Uganda.
The facility will help Ugandan companies become “investment ready”,
and, according to a statement, this will be done by actively match-making them
to long-term investment capital, to allow businesses to focus on growth
rather than short-term funding needs.
The funds will be channelled to the recipient companies in form of
venture capital, as opposed to direct loans or grants.
Venture capital allows the investor or owner of the capital to
invest in an enterprise to boost growth, and is a long-term investment, usually
allowing the investor to be part of the company.
The facility also aims to be a one-stop centre where companies can
access all their transaction advisory needs, including tax, legal, banking
and other business-related consultation.
The selected enterprises will have access to business
development support to increase their competitiveness and place them on an
accelerated growth path.
The project will then make the companies ready to attract other
kinds of investors.
FSDU Executive Director Rashmi Pillai says the facility was
created to respond to the cries by Ugandan companies which needed non-bank
financing which is otherwise short-term and expensive.
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Apart from the funds, these companies benefiting from venture
capital are supported to put in place adequate governance, accounting and
operational structures that will guarantee growth and scale.
Keith Kalyegira, the Capital Markets Authority CEO pointed out
that the Deal Flow Facility will play a vital role in mobilising saving
and channelling them into productive investments for the creation of jobs and
He says these are roles that commercial banks cannot provide due
to the nature of their financing, which involves staking 100% collateral, among
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Businesses globally and in Uganda are suffering the economic
consequences of the COVID-19 pandemic, with a decline in consumer demand,
and hence, companies are taking on huge losses.
The partner in the program say this situation does not take away
the fundamentals of a good business and whether the business has the potential
to grow and scale once we have all overcome this external shock globally.
The Private Sector Foundation Uganda, Head of Skills Development,
Ruth Biyinzika Musoke says the high cost of finance is among the top three
challenges to entrepreneurial development in Uganda, especially for SMEs.
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The European Union Programme Manager for Finance, Agribusiness and Land, Adolfo
Cires Alonso said there is a lot of idle capital with equity investors and
other long-term funds, but Ugandans are too used to commercial banks because of
the ease with which the loans are acquired.
He says because the banks only need you to have collateral and
agree to their interest rates.