Money Talks

Why Access to Capital is a problem in South Sudan?

In my previous writings, I talked about the importance of capital in business set-up. I also explained how possible an entrepreneur can start a business even without a cash capital. This fact however does not diminish the fact that in our context entrepreneurs need capital to start or boost their capacities. All entrepreneurs thrive to get access to capital, however, the central bank has made it so difficult in our country to get access to finance. This is because it didn’t play its expected role on regulating interest rate sufficiently. Commercial banks are companies set up to maximize their shareholder’s wealth. They play big and win so big where regulators are asleep! Since 2005, these banks made millions of dollars by charging borrowers very high interest rates, simply because the watch-dog is either dozing or static in policy of regulating particularly interest rates. How are they supposed to be efficiently regulated and function is a topic reserved for another day! To stress this point further, banks are engine of development and growth. They are catalyst for economic growth, and allowing them to operate as they wish hurts not only entrepreneurs but the entire economic system.

Few days ago, I read a news that entrepreneurs are going to be granted some cash via a partnership program between the national ministry of finance and the World Bank. Today I learned from a trusted source that this was a white lie and a fake news! I was in shocked for a moment before I regained my spirit and say to myself wonders will never stop in my country! This news was everywhere in social media. There was even a link and an online form plus a deadline fixed as 4th of July. Supposed the news was fake and a lie why there are no statements from the ministry of finance and the World Bank?

News about access to capital and any news related to economic or financial commodities have an immediate impact on financial market, money circulation changes in a glimpse. Stakeholders are supposed to be careful so that young entrepreneurs are saved or they shall be hopeless. In regard to our subject, access to capital is nothing but an important component of business start-up. You may have a good idea to create value, serve the country or fulfil your potential but without a capital no matter how small it is, you may not succeed in launching the idea. So, capital is very essential. Then why making it hard for entrepreneurs to access it? Why the central bank is so adamant to proceed with its current system of free rate fix? In other countries where banks are truly regulated, central banks uses interest rate as a perfect tool of monetary policy to ease business boom and accelerates entrepreneurship. In Kenya for example, an investor is facilitated through different platforms to access capital. Microfinance, mini banks, and large commercial banks make it easy to start your business even without adequate collateral. You can get a short or medium term loan using your driving license or a lock book and sometimes even without both, just your national ID can serve the purpose. Imagine how easy is that process. In my country where land’s title is an issue, where else do you expect an entrepreneur to find a collateral. I challenge commercial banks to be more creative in this regard. They should think of other ways to grant investors loans. Can’t you partner with them in the business and share the board, corporate and financial management (some form of a joint venture) so that payment of the principle and the interest can be guaranteed? Can’t you evaluate them and differentiate a successful, smart and profitable business idea from just a mere trial? I believe you do all of that but with focus much more on what will be your return than supporting the young entrepreneurs. I know banks are passing through hard times, from currency devaluation, high inflation, legal framework to lack of adequate collateral. Moreover, your goal is to maximize your shareholder’s wealth which you cannot do without a thriving business environment driven by entrepreneurs. So, the only solution is to be creative enough and motivate entrepreneurs to access loans at an affordable rate. Today most banks give loan at 20-35% interest which I term as an exploited rate. I know foreign banks can’t do this in their countries. Then why doing it here? Simply because our economy is fragile, our central bank is at a trying time and our legal framework isn’t fulfilling. I therefore asked the central bank to wake up and rescue our entrepreneurs from this exploitation, urged the government to ease and enhance the business environment so that our resources are not taken for granted. Should we continue that way, our financial freedom and economic independent will be wiped away by the new financial mafia and our dignity will be in jeopardy too!      

About the Author.

Bak Barnaba Chol (Dr. BBC) holds a doctorate in Finance from United States International University. He is an Adjunct Assistant Professor at the University of Juba. His areas of research interest are Banking, economics, entrepreneurship and finance. You can reach him via Email: alukchan@gmail.com  Phone: 0929001008

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