At the end of May 2020, Stella Keitirima Enterprises Limited (SKEL), a dealer in agricultural produce based in Gulu District Northern Uganda, experienced a thirty five percent drop in revenue and hundred percent drop in operating cash flows, three months into the nationwide lockdown, in line with the findings of the Uganda Business Survey 2020 that 85 percent of small and medium enterprises (SMEs) would go into distress after the lockdown.

SKEL buys agricultural produce, sorghum, cassava and maize from a network of 3,380 farmers (63% female, 55% youth) across Northern Uganda, sells to the local markets in the region and also supplies Uganda Breweries Limited through its aggregator Grain Pulse Limited. The lockdown restrictions included the closure of restaurants, bars and recreational centres, resulting in decreased demand for alcoholic beverages and subsequently reduced production, affecting SKEL business operations.

“We had already given out seeds to the farmers at the beginning of the season and they had planted but when the crops were ready, it was the lockdown and there was no market. The breweries pay a higher price but they were not buying,” explains Stella Keitirima, the proprietor and majority holder of SKEL.

SKEL provides farmers with the recommended seed varieties and offers advice on farming techniques to ensure the produce meets the standards of the buyers. The company offers a number of services to farmers and the community currently including, capacity building, seed supplies, marketing of farmer produce and employment opportunities. Being a woman, Stella recognizes the importance of creating gainful livelihood opportunities for women and youth and unleashing their entrepreneurial potential. The company strives to employ more women in Northern and Central Uganda and in the process improve maternal health and child nutrition and enhance household incomes.

To honour the obligation with the farmers, SKEL bought and stored some produce in anticipation of the lifting of the restrictions, but eventually sold it off at a loss as the bars and night clubs remain closed.

With no incoming cash and cash balances depleted, Stella loaned the business UGX 18,000,000 (US $5,000) to help with the day-to-day operations and settle outstanding expenses but the business continued to struggle.

Cognizant of this challenge faced by many Ugandan SMEs, the United Nations Capital Development Fund (UNCDF) together with its partners, the Private Sector Foundation Uganda (PSFU) and the Uganda Development Bank (UDB) have established a Small Business Recovery Fund (SBRF) to support SMEs to overcome the liquidity challenges due to COVID-19. The SBRF is part of the Support to Agricultural Revitalization and Transformation (START) facility, a tripartite partnership between UNCDF, PSFU and UDB designed to support agribusiness SMEs in Northern Uganda. In July 2020, when UNCDF and PSFU requested for applications under the Small Business Recovery Fund (SBRF), SKEL applied and fulfilled all the requirements for financial support. As of December 2020, the SBRF had disbursed UGX 320, 000,000 (US$86,500) to eight SMEs (including SKEL) leveraging at least US$70,000 from SME’s own contributions.

In January 2021, SKEL received a UGX 40,000,000 reimbursable grant to enable the business to meet its operational requirements. The grant is repayable back to the fund within a period of one year at zero-interest rate to enable the businesses build their credit, as they repay smaller amounts while solving their immediate liquidity challenges, mainly resulting from the impact of COVID-19 pandemic.

With this funding the business has been purchasing raw materials, and also connecting with new farmers as it looks to expand its farmer network. Stella notes that most of the farmers are skeptical about planting this season, given the losses they incurred last year. Many of the farmers have opted to grow a different variety, that is less expensive and more commonly used for food and is also within SKEL’s product range.

“I am really grateful for this funding; it came just at the right time. Lockdown was hard on us but now we are able to move, I have been able to reach places that I hadn’t reached before, and I am meeting new farmers who will be our suppliers. We are slowly getting back on track,” she shares.

SKEL is also in the pipeline to receive concessional loan under the START Facility for drying, milling and packaging of sorghum, cassava and maize flour and related products.

“We are glad that the SBRF is coming to the rescue of the agribusiness SMEs to enable quick economic recovery after the devastating effect of COVID-19 pandemic but also helping to prepare these SMEs for much bigger concessional funding to undertake value addition and agro processing under the START facility,” says Deus Tirwakunda, the START Facility Manager.

The Small Business Recovery Fund is a dedicated short-term emergency financial relief fund to support at least 20 selected START facility pipeline SME’s facing threats from COVID-19 related challenges and accelerate their capacity to access START Facility concessional funding from Uganda Development Bank and other financing institutions. We expect all loans extended to SMEs under the recovery fund from the START Facility to be paid back by December 2021.

The initial funding under the SBRF, which was envisaged for a limited period to kick-start a bigger recovery fund from other sources, has already attracted additional funding of US$144,626 from the International Multi-Partner Trust Fund to increase access to finance for gender and youth responsive MSMEs to enhance recovery from the effects of COVID-19 across the country.

About the START Facility

The START Facility implemented by UNCDF, PSFU and Uganda Development Bank (UDB) with the financial support of the European Union is structured as a blended finance facility providing a customized mix of business development services, project development and finance structuring services, and financial products listed above. The START Facility is designed to support the implementation of the Development Initiative for Northern Uganda (DINU) programme’s food security and nutrition component. DINU is a Government of Uganda programme supported by the European Union and coordinated through the Office of the Prime Minister with the goal to consolidate stability in Northern Uganda, eradicate poverty and undernutrition and strengthen the foundations for sustainable and inclusive socio-economic development. UNCDF Is one the implementing partners of DINU Program.

For more information:

Deus Tirwakunda
START Facility Manager
deus.tirwakunda@uncdf.org

Joan Alupo
Communications & Knowledge Management Specialist
joan.alupo@uncdf.org