The Public Accounts Committee (PAC) has warned top officials of Rwanda’s Business Development Fund (BDF) to stop abusing its authority to an extent that the institution has failed to meet its core mission of funding local business enterprises.
Yesterday, BDF officials reappeared before a PAC hearing to explain how they failed to manage funds meant for business development of which in the fiscal year 2018/19 the institution failed to properly monitor and recover most loans dished out resulting in most funded projects making losses.
On September 17, PAC sent away BDF officials from the initial public hearing after it emerged, in the opinion of the parliamentary committee, that the officials were not prepared to respond to the above issues sighted in the Auditor General’s report (2018/19).
The PAC assessment on the AG’s report indicated that BDF as an institution charged with financing local small and medium sized business in Rwanda failed to meet this requirement and instead funded foreigner- owned projects.
When asked to explain why this was done contrary to the legal procedures of the institution, BDF CEO, Innocent Bulindi said that:
“We didn’t see this as a big deal in a way that would cost us anything…”.
PAC chair Valens Muhakwa immediately cut the CEO short and said:
“Rwandans are poor and need funding for their projects. How can you say this is not a big deal? Unless you are saying that we are the ones who don’t understand your mandate?”
This kind of response also shocked some PAC members who questioned the sense of purpose that BDF officials have.
“Do you even have a heart of concern to make a choice based on a personal conviction that one has to fund Rwandans before looking at Americans who have come with their own money?” asked MP Jeanne d’Arc Uwimanimpaye.
This is evident in the AG’s report which for example showed that BDF provided credit guarantees worth Rwf25.1billion out of the total available credit guarantee fund of Rwf49.2billion provided from 2011 to August 2019.
The above credit guarantee to finance 217 projects of large enterprises as opposed to the original policy of funding SME’s.
“This does not facilitate as many deserving beneficiaries to access finance as should have been. Providing credit guarantees to large enterprises deviates from the BDF mandate,” the AG said.
In reviewing BDF’s financial activities MPs showed that the institution continued to make losses as a result of contradicting its guidelines put in place by its board.
For instance, BDF didn’t put into consideration regulations of guaranteeing project funding without assessment of the risks involved.
For example, BDF committed guarantees worth Rwf813.8million to 11 enterprises without appropriately assessing projects viability and did not consider key projects aspects and risks such as availability of market, certification of the project, sufficiency of working capital and availability of infrastructure like electricity to enhance envisaged production.
Consequently, projects failed and BDF compensated Rwf452.3million representing 56% of committed guarantees.
In reference to this, PAC Chairman MP Muhakwa asked the BDF boss to reexamine how he uses his authority if the institution should serve its core mandate.
“You have the power but you shouldn’t use it in the wrong way ending up making the wrong decision contrary to your management committee. Stop this because it doesn’t benefit the institution nor government at all,” Muhakwa said.