The wrong understanding of projects to be the main obstacle for young Burundian Entrepreneurs to access bank credits, Expert says.
Expert in socio-economics Mr. Hegeune explained that the wrong conception of Burundian entrepreneurs is one the reasons to why they fail to get bank loans.
This was in a summit organized by the Burundian NGO PARCEM. In addition, the expert stressed that young entrepreneurs do not know the right time and place to set heir project, adding that this causes misallocation of resources when some get funds at the wrong time.
Although, the youth alone can’t offer the solution to this problem, he stated that the banks also do have a part to play in availing loans to the young entrepreneurs and called for a reduction in interest rates as well as an implementation of a national fund guarantee to be an alternative for mortgages which the youth doesn’t have yet.
Most importantly on part of the youth, he called for them to have a great responsibility and entrepreneurial spirit and a “profound change” in mentalities on their part so that banking institutions can have confidence in them.
According to Mr. Eugene Hategekimana, a socio-economic expert, the wrong conception of projects is the main barrier for the Burundian youth looking for income-generating activities after graduation to access bank loans., he said during a workshop organized by a Burundian NGO, PARCEM ( Parole et action pour le
réveil des consciences et Changement des mentalités – Word and action for the awakening of consciousness and change mentalities).
In the Burundian youth, the rate of unemployment for those living in Urban areas is counted to be 65% over 55% of those living in rural areas, Mr. Eugene stated.
The problems young Burundian Entrepreneurs have.
“In my opinion, the projects badly planned in time and space by young Burundian entrepreneurs constitute in themselves a major obstacle for access to financing services in the form of credits especially; hence the need to intensively strengthen the capacity of these young people to ride good bankable and profitable projects,” explained Mr. Heguene.
In addition, he pointed out hat one of the main problems the youth has is that many unemployed young Burundians, who are eager to undertake, do not know “the time and place” of setting up any project.
“Indeed, some young entrepreneurs agree to take bank loans very late while the start-up period for projects for which the funding was requested for, has already passed. As a result, such funds obtained by bank credit will not really serve what they were intended for; hence bankruptcy situations arise because of misallocation of money obtained by bank credit “.
He explained that there is lack of responsibility and entrepreneurial spirit on the part of the unemployed Burundian youth and calls for a “profound change” in mentalities on their part so that banking institutions can have confidence in them.
On the bank side.
Know that some major banks have refused to fund any projects by young entrepreneurs in Burundi because they lack mortgage guarantees, however, Mr. Heguene asks the Burundian government to avail a national fund Guarantee to help as an alternative way for the Burundian youth, which makes 60% of the Burundian population.
“But also, it is out of the question that such a mechanism is perceived as a fund to guarantee bankruptcies; hence the need to ensure the sustainability of a good study for the projects proposed by young people for bank financing is by setting up a monitoring and analysis structure by the banking institutions “, he suggested.
What banks can do to help.
In addition to providing a solution, he encouraged local banking institutions to grant “grace periods” (6 months for example) to young unemployed entrepreneurs in Burundi so that the beginning of the repayment of loans contracted is consistent with the period of profitability of the financed projects. The expert also recommended to the banking institutions “to establish rates of preferential credits” so that these are factors stimulating to “boost” the economic development of Burundi.
Lastly, he explained on the interest rate that bank institutions charge on loans, which is very high and calls for a reduction for debt holders while currently, interest rates charged by banking institutions vary from 19% to 24% and for Micro Finances around 14%.
“Today, I find that the interest rates charged by banking institutions are very high and should be supplanted by preferential rates. The establishment of the National Guarantee Fund is one of the formulas for reducing these interests. We believe that bank interest ranging from 5 to 10% could make it easier for young Burundian entrepreneurs to repay the loans contracted, “he said.
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