What SMEs need to access regional funding opportunity

Arusha. Facing financing challenges, Tanzania’s Micro, Small and Medium Enterprises (MSMEs) are taking every available option seriously.

Tanzania’s firms are top on the list of MSMEs that are beneficiaries to a European Union (EU) grants scheme in East Africa.

Out of 289 firms from the five East African Community (EAC) states, which applied for loans from the EU-EAC Market Access Upgrade Programme (Markup), 123 were from Tanzania.

A recently released report on the 40-million euros scheme indicated Tanzanian firms were keen to access finance to boost their businesses compared to those from its neighbours.

Kenya had 61 enterprises which applied for credits last year, followed by Rwanda (49), Uganda (38) and 61 for Burundi, The four year programme was launched in June 2018.

“A total of 289 SMEs applied and 50 - ten for each country - are now finalizing their coaching scheme,” said Mr Marco Aletti, the Access to Finance officer with the International Trade Centre (ITC).

He said successful enterprises are assisted to develop the business plans or expand the existing ones and grow, thus creating the desired wealth and jobs.

Incidentally, according to the report, coffee exporters formed the second largest segment of the applicants with 88 firms which sought financial support.

SMEs engaging in ‘a mix of target crops’ led the pack with 94 applicants with avocado farmers/exporters third placed with 33 followed by horticultural exporters (31).

The Markup programme, which operates from the East African Community (EAC) headquarters in Arusha, is structured around two intervention levels.

These are the EAC Window which supports the EAC partner states to improve the regional trade and business enabling environment for selected commodities.

The component also supports the private sector in enhancing the intra-regional trade often criticized for being low and the bloc’s export competitiveness.

The Partner States Window has the likes of national interventions tailored to EAC countries’ specific needs and complementing the EAC Window.

Mr Aletti said the majority of the SMEs within the region failed to get the capital needed because 42 per cent of them failed to produce their audit reports, among others.

Acting ITC executive director Dorothy Tembo admitted access to finance was a challenge to many SMEs in the East African region.

She, nevertheless, said the MARKUP project has struggled to address the draw back and that Tanzanian firms, in particular, may soon start to benefit.

She cited a $400,000 pre-approved loan to three small local businesses by TPB Bank after their business plans were reviewed by the programme.

The Moshi-based Mambo Coffee Company is being considered for a $1 million loan as working capital to boost its coffee export trading business.

The loan, according to ITC, would be sourced from the NMB Bank with a 50 per cent guarantee by the Private Agricultural Sector Support Trust (Pass).

Markup is a four-year-initiative launched in June 2018, funded by the EU with co-financing from Germany to the tune of 40 million euros.

It is intended to increase the EAC region’s competitiveness of its agricultural exports, principally to the EU.

Micro, small and medium enterprises (MSMEs) in Tanzania and elsewhere in East Africa form the backbone of the broader informal sector.

Although experts maintain it has been difficult to define, measure and capture its contribution to national statistics, it employs 80 per cent of the total labour force.

Studies indicate that the informal sector is estimated to contribute about 27 percent of Gross domestic product (GDP) in the country by 2010.

Most of the MSMEs in Tanzania are household business, run by employment of family members, with half of them formed to supplement the household incomes.

A national survey carried in 2012 found out that 45 per cent of participants in the sector were aged 34 years or less, with females constituting 34 per cent.

Large part of the non-agricultural informal sector is in the wholesale and retail business (55 percent) and accommodation/food services account for 26 per cent.

One of the firms which benefited from the grant is the Arusha-based spice producer Med Food which says the EU support would enable it to expand.

The company has successfully introduced over 20 products on the market, ranging from Spanish paprika to cloves powder and nutritious flour.

Med Food supplies its products (spices) to the Tanzanian market and exports part to the EAC market, particularly Kenya.

“We have high prospects for the market. The International Trade Centre is helping us in export strategy. This has enabled us to secure markets abroad,” said Mr Robert Likwawa, the general manager.

Spices remain the core products but lately they are getting more orders for nutritious flour, following a rising demand in households, schools and neighbouring Kenya.

The firm recently unveiled new premises at Kisongo along the Dodoma Road worth about Sh350 million with one of the core businesses now turning to nutritious flour.

Med-Food, established in 2007, has been operating from the premises of the Tanzania Engineering and Manufacturing Design Organisation (Temdo), a parastatal based in Arusha.

It is one of the beneficiaries of SME Impact Fund, which provides loans to small and medium enterprises (SMEs) in the agricultural business value chains, notably the processors.

The company is also supported by the EU-EAC Market Access Upgrade Programme (Markup), a four year, 40 miilion Euro initiative funded by the EU.

It is implemented in all the six member countries of the EAC bloc; Tanzania, Uganda, Kenya, Burundi, Rwanda and South Sudan and is intended to increase the competitiveness of the region’s agricultural exports.

Mr Safari Fungo, the pgoramme’s senior regional technical officer with Markup said Med-Food was also being assisted to access finance.

According to him, only 10 percent of SMEs in Tanzania, especially those in the agricultural sector, have access to finance “despite a reported excess liquidity in local banks”.