The one month period for disbursement of GHc600 million in financing on concessionary terms from government for micro, small and medium sized enterprises began on Wednesday, although understandably, there were no actual disbursements made on the first day as applications have just started being received by the National Board for Small Scale Industries which has been charged with managing the initiative.
However a deluge of applications are being expected over the coming weeks as MSMEs strive to benefit from the financing which is part of government’s GHc1.2 billion Coronavirus Alleviation Programme. Altogether, NBSSI expects to channel financing in the form of soft loans and outright grants to some 230,000 beneficiary enterprises spread across all 16 regions of the country before the disbursement period ends on June 20.
Loans are being offered at just three percent per annum interest rate – about a tenth of current, effective commercial bank interest rates and one twentieth of the rates demanded by micro-finance institutions which many of the eventual beneficiaries usually rely on for financing. The soft loans also offer a one year moratorium before repayments are to be made over the subsequent two years.
To reach as many MSMEs as possible with this offer, NBSSI is using selected commercial and rural banks which have agreed to put up counterpart funding of their own to the tune of some GHc400 million. Loans will also be disbursed through micro-financiers, and mobile money platforms.
No upper limits or minimum amounts have been announced with regards to loan sizes. The size of each loan – or in some cases outright grant – will be decided based on need, circumstance and repayment capacity. To supervise the approval and disbursement process a loan committee has been established comprising one representative each from the Ministries of Finance and of Trade & Industry respectively; a representative from NBSSI; and a representative of the participating financial intermediaries. Reputed audit firm, KPMG have been appointed as technical advisors to the initiative.
Beneficiaries will be companies adversely affected by the economic challenges resulting from the COVID 19 outbreak and those who need additional capital for expansion in response to surging demand for their products and services created by the outbreak, The main sectors being targeted are: healthcare and pharmaceuticals; manufacturing; agriculture and agro-business including food and beverage producers; water and sanitation including PPE suppliers; tourism and hospitality; education; textiles and garments; commerce and trade; and other services.
Businesses eligible for financing must have been in operation for at least six months although exceptions can be made for businesses younger than that but which have innovative strategies for their survival and have the potential to improve the general wellbeing of Ghanaians in the wake of the ongoing viral outbreak.
Only one enterprise can be supported per applicant which means entrepreneurs with several different business must choose which one is to be considered for support. Importantly, special consideration will be given to female applicants and to people with disabilities.
Although government claims that it has made requisite funding arrangements for its various COVID 19 related interventions, NBSSI itself warns that disbursements of approved soft loan applications will be subject to actual availability of funds, suggesting that there are still financing shortfalls. Loans will be disbursed on a first come first served basis which can be expected to persuade applicants to rush in with their applications to become among the first in line. Indeed, late applicants will miss out simply for applying too late, when the available resources have already been exhausted.
Applicants must first register with the NBSSI, which then kicks starts the application assessment process. A key documentary requirement is Tax Identification Number. However those who do not yet have one are allowed to apply and secure a TIN and then use it to support their application. This means MSMEs that have not yet been paying income tax are not automatically excluded; however their application will capture them in the tax net and so they will have to pay income taxes thereafter, whether they actually secure the soft loan they seek or not.