Investment advisors have called on Uganda to think of alternative sources of capital such as those on the stock market if small and medium businesses are to grow.
During the recent inaugural Mkutano Economic conference at Serena hotel, Patrick Mweheire, the chief executive of Stanbic bank, said “75 per cent of SMEs do not make it to their third anniversaries because they lack access to funding, to markets and to resources that would ideally encourage continuity.”
Yet, SMEs face a lot of difficulty in accessing capital in areas such as stock markets because they lack proper books of accounts that financiers can look at.
“The structure in any company plays a big role on whether it will be enlisted [on the Uganda Securities Exchange] or not. That said, SMEs need to think ahead, have a board of members, carry out good bookkeeping habits and where need be even hire accountants for this purpose,” Paul Bwiso, the chief executive officer of the Uganda Securities Exchange, said.
If more companies listed on the Uganda Securities Exchange, which has less than 10 local firms compared to Nairobi’s more than 50, the benefits would spread wide.
“The beauty of having a thriving stock market is that it creates jobs too for fund managers, brokers and economists. It’s such an easy way of raising money too,” Sello Moloka, the former CEO of Old Mutual South African, noted.
Instead, many SMEs in Uganda depend on commercial banks for loans, whose interest rates remain high compared to other regional markets.
According to Mweheire, “commercial bank lending in emerging economies is capped at 30 per cent. In Uganda, we are at about 90 per cent.” He called for alternative sources of finance.
The Mkutano conference was organized by Dero, an investment advisory firm, and the Capital Markets Authority.