Inhlanyelo Fund injects E44 million into economy
MBABANE – Inhlanyelo Fund has invested E44 million in emaSwati- owned businesses to develop the economy. In 2023, Inhlanyelo Fund, which has created over 27 000 new businesses since it’s establishment in 1999, injected E44 million to approximately 5 000 micro entrepreneurs across the country.
A majority of the beneficiaries are women who have received a large portion of the disbursed funds.
Chief Executive Officer (CEO) of Inhlanyelo Fund Wandile Kunene said the entity disbursed E44 million to 4 695 micro entrepreneurs. Kunene said a majority of the businesses funded were maize farming, vegetable farming, broiler rearing, piggery, grocery shops, dressmaking, market vendors, handcraft and hawkers.
Kunene said 70 per cent of the beneficiaries, totalling 3 317, were women from across the country who received loans amounting to E29 607 000, while loans valued at E24 million were directed to businesses in the agricultural sector.
DISBURSED IN LOANS
He further mentioned that the Lubombo Region received the highest number of loans amounting to E14 124 500 followed by the Hhohho Region, where a total of E10 824 500 was disbursed in loans. The third region was the Manzini Region, where E9 868 000 was disbursed while E9 321 500 was disbursed in the Shiselweni Region.
Meanwhile, constituencies that benefitted the most from the fund include Siphofaneni, Maphalaleni, Kukhanyeni, Matsanjeni North, Ndzingeni and Matsanjeni South, to name a few.
He added that the highest benefitting chiefdoms in 2023, were Madlenya, Maphalaleni, Nsingweni, Maphungwane, KaLiba and Nkiliji.
He said one of the beneficiaries of the fund, Lukhetfo Mabuza of Ekuvinjelweni Chiefdom under Nkhaba Inkhundla, used the loan to plant potatoes, cabbages and spinach. He said through the funding from Inhlanyelo Fund his business has grown. The loan has helped him to improve his irrigation system (drip system) and purchase inputs.
He said Mabuza has two full-time and up to 16 seasonal employees, especially during planting, top dressing, weeding and harvesting seasons. He elaborated that Mabuza said without the funding from Inhlanyelo Fund he would not have reached this level.
He stated that another beneficiary, Zandile Dlamini of LaMgabhi Constituency, has received a total of three loans amounting to E24 000 from Inhlanyelo Fund . With her first loan she was able to purchase her first industrial sewing machine. She moved from working from home to renting a small room in a busy complex at Mhlabubovu inside a grocery shop, where she worked for two years before she moved into a bigger space in the same complex.
She now owns two industrial flat sewing machines and one industrial over-locker machine that she bought through Inhlanyelo Fund loans. She supplies four schools with school uniforms.
She has one employee and she hires temporal staff as per the demands of her orders. He added that Dlamini relayed that she was pleased with the loans she received from Inhlanyelo Fund as her business had grown and she was able to support her family.
Kunene explained that the Inhlanyelo Fund loans were accessed through chiefdoms on a revolving basis. “It must be noted that at chiefdom level, the first time borrowers are eligible to apply once the previous first time borrowers have fully repaid their loans. This puts the responsibility for repayment on the borrower, the chiefdom leadership and the community members. It is, therefore, imperative that clients repay their loans in order for other prospective clients to benefit as well,” he said.
He said Inhlanyelo Fund’s ability to operate throughout the country has ensured that even the most distant deserving entrepreneurs are assisted. The fund predominantly operates in the rural areas; hence, the fund played a huge role in reducing urban migration as entrepreneurs were able to grow their businesses in rural areas. Furthermore, the existence of the fund has tackled the issues of job creation, poverty reduction and economic growth in the country, added Kunene.
He further mentioned that the loans have empowered the fund’s clients who were typically semi-illiterate, unemployed and un-bankable to start and grow their micro-businesses.
“Women continue to be the major beneficiaries of the Fund (70 per cent), it, therefore, follows that the utilisation of the funds have improved family livelihoods.
Women are known to spend most of their income with their families, thus promoting health, nutrition and literacy in their families. Furthermore, it means women are economically empowered because they gain control over their finances, thus have greater levels of decision-making within their families,” said Kunene.
He said one of the major challenges they faced while disbursing the fund was that dealing with dishonest or untrustworthy clients and chiefdom disputes hindered the operations of the fund
It is understood that the fund continues to make a significant contribution towards economic growth in the country.
This is in line with one of King Mswati III’s directives to government during the recent Speech from the Throne he delivered during the Official Opening of the First Session of the 12th Parliament.
During his speech, the King issued a directive to government to implement strategies to stimulate entrepreneurship and expansion of micro small and medium enterprises (MSMEs).
“Our focus must be on fostering a more conducive environment for business and investment. Simplifying the process of registration for SME’s should be considered by implementing digital solutions as well as reducing the tax compliance burden for small, emerging businesses,” directed the King.
LARGEST GROUP OF EMPLOYERS
It has been widely reported that micro, small and medium-sized enterprises account for 90 per cent of the world’s business ecosystem and 50 per cent of the global GDP and they are the largest group of employers worldwide, providing jobs for 70 per cent of the population.
Micro-enterprises and SMEs are said to be the heart and soul of any economy, regardless of their size or location. On the global scale, they account for a large proportion of existing businesses, as mentioned previously, in addition to generating employment, spurring innovation and stimulating economic growth.
These companies are fundamental to
any country’s economic fabric, as they not only create jobs, but also support economic diversity and resilience in general. The ability that micro-enterprises and SMEs have to adapt rapidly to market changes and consumer demand gives them a unique advantage in terms of innovation and competitivity.
The agility and responsiveness of micro-enterprises and SMEs let them play a key role when it comes to innovation. These companies usually have agile and flexible structures, allowing them to make quick decisions and take on calculated risks.
Micro-enterprises and SMEs are often the ones that venture to explore new ideas and market approaches, developing innovative and breakthrough solutions. Given that they have a closer relationship to consumers and local needs, these companies can identify opportunities that large corporations might miss.
Their ability to innovate and adapt to technological and social change is key to economic progress.
Over the years, Inhlanyelo Fund has contributed significantly towards empowering micro entrepreneurs in the kingdom. The fund is a not-for-profit microfinance institution, which provides seed capital to grassroots entrepreneurs across the country. The fund was founded by the Kirsh Foundation Eswatini to assist small business entrepreneurs in the country.
The Inhlanyelo Fund began as a pilot project in 1999, when businessman Nathan Kirsh underwrote an initial E5.5 million (US$834 357). The fund proved an important source of gender empowerment, since women constituted the majority of the 3 500 small business entrepreneurs who made use of the facility.
The Inhlanyelo Fund’s mission is to awaken, promote and support entrepreneurial talent at grassroots level by providing loan capital for Eswatini owned micro and small business projects.
Inhlanyelo Fund, a seed capital fund, utilises existing administrative and community leadership structures as its key regional intermediaries and sub-structures from where to spread and penetrate its micro loan operations to individual beneficiaries.
According to a report compiled by Vinaye Ancharaz, compiled for developing a financing model for micro, small and medium-sized enterprises (MSMEs) for the government of Eswatini, which was presented on January 10, 2021, MSMEs are a ubiquitous feature of the economic landscape of most developing countries and Eswatini is no exception.
A survey by FinScope in 2017 estimated the number of MSMEs at close to 70 000, employing over 90 000 people, or about 21 per cent of the workforce. No reliable data on the MSME sector’s contribution to GDP was available at the time; however, the figure was not expected to be too far below the 50 per cent mark.
The FinScope survey further reveals that 75 per cent of the MSMEs are owned by independent entrepreneurs, with no jobs created and about the same proportion (74 per cent) are located in the rural areas and are headed by women.
The bulk of them prevail in low value added activities in the wholesale and agriculture sectors. Significantly, 75 per cent of the MSMEs operate without a business licence, therefore, in the informal sector. It is clear that most of them were set up not by choice, but by necessity. The evidence suggests that such firms struggle to survive. They continue to face important constraints to growth, which condemn them to remain small and rudimentary.
Most stakeholders, however, believe that MSMEs in Eswatini have the potential to contribute considerably more to employment, economic growth and poverty reduction.
Furthermore, innovation-driven MSMEs can be a catalyst for structural transformation. This role is well recognised by government, which has mainstreamed MSME development in its Vision 2022 and the National Development Strategy.
The policy or regulatory framework for MSMEs is at a relatively early stage of development and is premised on the MSME National Policy, adopted in 2004 and most recently revised in 2018.
INVESTOR ROAD MAP
The policy framework encompasses, among other strategies, the investor road map, aimed at improving the business climate to attract foreign direct investment and promote local investment in SMEs; and various Acts meant to regulate and supervise bank and non-bank financial institutions in Eswatini.
A Citizens Economic Empowerment Bill, which was passed by Parliament last year, is expected to strengthen the framework for meaningful participation of citizens in high-impact enterprises.
Concomitantly, the institutional landscape of MSMEs features a variety of establishments, government, private or donor-funded — dealing with the development and promotion of enterprises and/or providing financial services support.
The Ministry of Commerce, Industry and Trade, through its MSME unit, is responsible for coordinating, supporting and regulating the MSME sector. In particular, it is the implementing agency of the revised Small, Micro and Medium Enterprise Policy. The Centre for Financial Inclusion (CFI) started out as a microfinance unit within the Ministry of Finance, but now operates as a semi-autonomous body with the broader mandate of facilitating access to financial services for households and enterprises.
The Small Enterprises Development Company (SEDCO) is the main organisation providing business development, capacity-building and incubation services to MSMEs. The Eswatini Development Finance Corporation (FinCorp), the country’s de facto development bank, is focused on small business lending and is an important player in the microfinance sector.
These institutions operate a limited range of schemes and programmes aimed at boosting business development, improving access to finance, and enhancing MSMEs’ impacts on the economy. For example, the Central Bank of Eswatini operates the Small-Scale Enterprise Loan Guarantee Scheme (SSELGS), established in 1990, to help MSMEs obtain credit from two commercial banks by guaranteeing the loans, to the order of 95 per cent for start-ups and 85 per cent for all other enterprises.
Despite the various policies, institutions and schemes in support of MSMEs, numerous gaps exist, with the effect that the current MSME ecosystem is not yielding the desired outcomes and impacts. Regulatory gaps include the fact that the country lacks a national export strategy, which could support small firms venturing into export markets.
Similarly, there is an important gap between the intent and the impact of most policies, strategies and schemes when these are not fully implemented. This appears to be the case, for example, with the National Financial Inclusion Strategy.
On the other hand, the eligibility requirements for the SSELGS are so onerous that they effectively shut out potential applicants. Moreover, despite the clutter of well-meaning support institutions, their efforts and services remain uncoordinated, leading to confusion, inefficiency and waste.
It was further reported that it is crucial to view the problem of MSMEs’ access to credit holistically in terms of the broader ecosystem, including financial literacy, financial development, banks’ attitude towards risk, and the entrepreneurial culture. From this perspective, the problem facing MSMEs may be more of one of lack of preparedness to access finance rather than the availability of finance.