Supporting Your Business Series:

Advice from the Banking Sector in Rwanda

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Many SMEs have questions about banking services right now, given that businesses have faced low cashflow, difficulty in repaying loans, and uncertainty. In response, the SME Response Clinic brought together a panel of bankers for a Facebook Live Event.

On May 28, this live webinar entitled “A Discussion with the Banking Sector” kicked off the Supporting Your Business Series. The interactive session engaged banking experts Maurice K. Toroitich, Managing Director of BPR Atlas Mara, Robin C. Bairstow, CEO of I&M Bank and Chairman of Rwanda Bankers Association, and Christine Baingana, CEO of Urwego Bank. It was moderated by Tony Francis Ntore, Executive Secretary of the Rwanda Bankers Association, and Jean Bosco Iyacu, Director of Programs at Access to Finance Rwanda.

Bankers offered advice to SMEs on managing businesses and relationships with their financial institutions. Here are the top recommendations to help your business survive the pandemic:

Many SMEs operate without keeping accurate and up-to-date records, given their small staff and small revenues. However, banks will look MORE at accurate and complete records when they assess your creditworthiness than they look at collateral. This means:
• Keeping written records of cash in and cash out on a daily basis
• Ensuring that you can prove your cash flow by using your current account or mobile account for business transactions
• Using an EBM machine so that your transactions are recorded
• Paying your taxes, and keeping your tax paperwork in order – this also proves your cashflow and can be provided to the bank when applying for a loan
Many small business owners focus on collateral – like building houses – when they think about obtaining a loan. But, if your records are not in order, you may not qualify. Businesses must show the bank that they not only have cashflow, but also that they are able to manage it.
Learn more about keeping accurate records with AMI’s free Bootcamp and Trainings:
Bootcamp: Thursday, June 5th, 2020 – 

One of the main mistakes banks see small businesses make is using one account for both business and personal funds. When you start a business, it is important to open a separate business account so that you can track your earnings and expenses in an organized way. A good rule is to pay yourself a salary, but to pay it from your business account into your personal account so that you have a clear idea of your cashflow.

Keeping separate accounts will help you to better understand your own business’s profitability and will help if you decide at some point to access credit from a formal institution.

The COVID-19 pandemic has brought many changes to the business climate in Rwanda. Those businesses that learn to be flexible, to assess the effect that the crisis has had on their businesses, and who learn to plan three to six months in the future will be best placed to survive.

One important piece of advice from bankers is for businesses to plan for a much different market than they experienced in the past. For example, if a business made a certain revenue pre-COVID, they should not assume that this will go back to normal after the crisis has passed. Planning for a different customer base, and for reaching new customers will be key. Some businesses may move online, or adapt a model with more delivery services, for example.

Another thing to keep in mind is that now is not the time to venture into a completely new business line. Trying to start a new business in a new market is one of the riskiest propositions during a difficult time. While there will be changes and modifications in existing businesses, trying to take on a new venture without the knowledge of the business, good or service, and without the capacity to run that new venture, may lead to failure. It is important to first ensure that you have the knowledge and capacity for a new venture before seeking capital from a bank. If you cannot demonstrate this, you are likely to be disqualified.

Learn more about keeping accurate records with AMI’s free Bootcamp and Trainings:
Bootcamp: Thursday, June 5th, 2020 –
Open Webinars:

To keep you, your staff, and your clients safe, new digital solutions can be used in place of cash. Currently, there are zero fees when you transfer from a mobile wallet to a bank account, transfer between mobile wallets (person to person transfers), pay a merchant with mobile money, or pay your bills with mobile money. There are also no fees when you make a payment at a merchant with a card via a point-of-sale (POS) device.

These digital solutions help not only in avoiding touching cash, but they also help to keep solid records of your business cashflow. It is important to keep separate wallets or digital accounts for personal and business transactions so that if you need to access a loan or other solution from a bank, you can clearly show these records as proof of your creditworthiness.

For current clients, banks have developed a number of services to help repay loans. These include grace periods on interest and principle, other deferments, and waiver of late penalties and fees. Banks understand that many SME businesses are experiencing a decline during the lockdown.

Talking to your bank – to your relationship officer or loan officer – is key. If you are having trouble do not wait, do so right away. The bank will work with you to decide the time period needed for grace periods or deferments, often depending on the sector you are in and how hard it has been hit.

On June 4, 2020, the National Bank (BNR) has launched the Economic Recovery Fund, a fund which will allow banks to offer discounted loans and other services to businesses struggling due to the crisis. However, it is important as a business to plan carefully about your capacity to borrow and to earn enough to repay your loan. Even though loans will be available at lower interest rates for qualifying borrowers, they are not a grant. These loans will come with the same terms and conditions as a normal loan – to repay in full, on time and with all applicable fees and charges.

If you do qualify, and have a clear plan for how you will use and repay the funds, you may learn more by talking with your relationship officer or loan officer. They will help to make sure that you have all of the paperwork needed, that you have been a responsible client in the past, and that the loan will be a help rather than a burden for your business.

Learn more about assessing your capacity to borrow with AMI’s free Bootcamp and Trainings:
Bootcamp: Thursday, June 5th, 2020 –
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Banks find that sometimes clients will use the loan funds that they have received for something other than their business, and when it comes time to repay, they no longer have the money. This is the number one reason that banks lose confidence in a customer. While it seems like a good idea in the short term, it will affect your ability to take out loans in the future, especially now that defaulting on a loan will affect your credit rating with the Credit Reference Bureau.

Rather than diverting funds – even if you have a crisis – as always, you should talk immediately with your relationship officer or loan officer. Your bank is not there to judge you but to help you. Without clear, truthful, and up-to-date information from you, they will not be able to discuss your problem and come up with a solution that will avoid you falling into default.

Many businesspeople ask themselves: “Why should I get insurance and spend money that I will not see again if I do not experience a problem?” However, insurance is one of the most important products that a business can purchase to help manage risk. One rule the bankers offered is that if you cannot afford an insurance premium, then you cannot afford to not be insured.

In the case of an emergency – theft, a fire, an automobile accident – you need to protect the assets and infrastructure of your business. Insurance is available through financial institutions as well as through insurance companies to help you protect yourself against unforeseen events and avoid losing your livelihood.

The relationship between a business and its clients and customers cannot be ignored, even when the business climate is difficult. You have got to stay in contact with both customers and suppliers so that they know what you are doing to continue your relationship once business begins to pick up again.

For example, many small businesses struggle to pay rent or other suppliers because revenues were low or nonexistent during lockdown. While suppliers do not look forward to losing revenue, many are open to negotiation so that rather than losing ALL revenue, they still are able to make some earnings.

In terms of customers, you may not be able to supply goods and services in the same way that you could pre-COVID. You may need to negotiate with those who have paid in advance or reassure customers that you have a plan to reopen and will be working again as soon as possible. The key is to keep the lines of communication open so that your customers do not seek another business who is willing to speak with them and value their business.

Learn how to negotiate with suppliers with AMI’s free Bootcamp and Trainings:
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There are many misconceptions about banks and other financial institutions – they are only for the rich, they are not available to talk with me, they are just there to make money. While banks are indeed businesses, their business is to provide services to clients like you. The key to building a beneficial relationship with a bank is trust.
Sometimes clients are afraid to tell a bank that their business is struggling or having difficulties in repaying a loan, for example. However, banks are well aware that this is a difficult time for many small businesses, and it is in everyone’s interest to help these businesses survive. As a client, it is imperative that you talk with your relationship or loan officer right away and provide clear, up-to-date and truthful information so that they can work with you to come up with a solution.
Sometimes this may be a deferment or grace period on payments, it may mean adjusting the repayment schedule for a longer period, or other solutions. But without trust and communication, none of these services are available.
The world of business will be different post-COVID, and banks and other financial institutions are there to help SMEs navigate a more uncertain business climate. If you have not yet established a relationship with a bank, now is the time to do so. So:
• Get your financial records and other business paperwork in order
• Open an account so that you can start to keep good records that will help you as your business grows – especially if you will seek a loan at some point
• Keep your business and personal accounts separate
• Follow a course – like AMI’s Bootcamp or open courses – to learn important bookkeeping, risk management, and planning skills
• Keep the lines of communication open with your suppliers and clients
• Look for ways in which to adjust your existing business so that you can continue to do business
• View credit as a tool, but a tool that comes with responsibilities and not as a grant or a gift
• Use your loan for the purpose for which it was intended
If you keep these points in mind, and talk with your bank or financial institution so that they can help you when you need it, you will have a much greater chance of weathering the COVID-19 crisis!