BUSINESS DEVELOPMENT FUND ANNUAL REPORT

ANNUAL REPORT 2018/19

BUSINESSDEVELOPMENTFUND

BDF ANNUAL REPORT | 2018/19

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CON-TENTS

OUR MISSION 4

OUR VISION 5

QUOTES FROM H.E. PAUL KAGAME 6

BOARD OF DIRECTORS 7

SENIOR MANAGEMENT TEAM 8

THE COMPANY STRUCTURE 9

CHAIRMAN & CEO’S MESSAGE 10

TESTIMONIALS 13

INFORMATION TECHNOLOGY 14

MARKETING WRITE-UP 16

RISK MANAGEMENT STATEMENT 18

FINANCIALS 21


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the mission

PROMOTING SME DEVELOPMENT

THROUGH THE PROVISION OF FINANCIAL SERVICES

TO ENHANCE THE LENDING MECHANISM OF FINANCIAL

INSTITUTIONS.

ourmission


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the vision

ourvision

TO BE THE LEADER IN FACILITATING SMES WITH

ACCESS TO FINANCE AND ADVISORY SERVICES

FOR NATIONAL DEVELOPMENT.


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QUOTES FROM H.E. PAUL KAGAME

A good development partner’s success is tied to its client’s own success.

We must be ready to seize the new opportunities that are coming our way.

Business is more than trading; it is about unlocking a future-oriented mindset, focused on long term planning and investment.

Progress in any endeavor is about valuing time highly and using it well.

We must embrace and have the attitude that we can do many things;it is possible for us to do many things that would take us out of poverty.

QUOTES FROM H.E. PAUL KAGAME


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BOARDOF

DIRECTORS

BOARD OF

DIRECTORS

The Board of Directors has the overall responsibility of providing the organization with broad policies and objectives, while ensuring that sufficient resources are available for operations and these resources are managed effectively.

Odette MBABAZIMember

Alexis RUZIBUKIRAMember

Doreen I. KAGARAMAMember

Pierre Celestin HABYARIMANAMember

Loyce BAMWINEMember

Egide RUGAMBAChairman of the board


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SENIOR MANAGEMENT

TEAM

With powers conferred onto them with and by authority of Board of Directors, the senior management team manages the day-to-day operations of the Fund.

SENIOR MANAGEMENT

TEAM

Janet KANYAMBOFund Manager

Benoit NIYONGABIREFinance Manager

Monique UMUGWANEZALegal & Company Secretary

Betty INGABIREHuman Resource & Admin

Carine S. MUGWANEZAMarketing & Relations

Jones KIZIHIRAI.T Manager

John KAGARAMAHead of Business Advisory

Livingstone NKUUSIBranches Coordinator

Innocent BULINDIChief Executive Officer


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THECOMPANY

STRUCTURE

Shareholders

Executive Committee

Operations Committee Board of Directors

CEO

ITHRALegal & Co. Secretary

Marketing & Reporting

Fund MgtAdvisory ServicesBranchesFinanceMarketing

& Relations

Audit Function Office Manager

Risk Function

Audit & Risk Committee

THECOMPANY

STRUCTUREOur staff head-count comes to 128 heads and it’s growing.


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CHAIRMAN & CEO’S MESSAGE

The Fiscal Year 2018 has been exciting for BDF in all fronts of investments and we are

pleased to present the results.

For a better part of 2018, BDF was engaged in a process to enhance its mandate. The Government charted the future direction of access to finance for SMEs by positioning BDF as the central entity to look after SMEs basic finance needs.

Thus BDF’s role is to increase lending to SMEs while sharing the risks associated with lending to them especially perceived high-risk groups such as women and youth with the lenders.

This is due to the fact that financial institutions find it too risky lending to them given the cost/benefit ratio in terms of time and resources required to process SME loans as well as the difficulties most SMEs face in consolidating capital and creating business plans to become viable lending candidates which creates a blockage to growth for SMEs. They however contribute a lot to lower the country’s trade imbalance.

According to 2014 MINICOM SMES Product Clusters, The SME sector, including formal and informal businesses, comprises 98% of the businesses in Rwanda and 41% of all private sector employm ent.

The introduction of the National Employment Program (NEP) as a common strategy that orients all stakeholders in the support of SMEs and the establishment of BDF’s role as a key implementing partner in expanding credit to the SMEs under Pillar 2 “Entrepreneurship and Business.

BDF has for the past years invested in human capital as the ba sis for improving excellence in delivering the Fund mission. Due to continued staff motivation and accountability, capacity development and team building activities, has improved the staff capacity and performance to the overall corporate mission .

Operational Highlights: IIn 2018, BDF provided credit guarantees worth Rwf 5,1 Billion to 1, 704 projects with cumulative credit guarantee approvals totaling Rwf 45.7 Billion to 9,334 projects.

Similarly, Grants disbursement s for the year were Rwf 3,4 billion for 222 projects reaching a cumulative high of Rwf 9,8 billion to 16, 282 projects.

SACCO Refinancing loans worth RWF 1.6 Billion to 117 SACCOs were disbursed reaching a cumulative RWF 5.2 Billion to a total of 320 SACCOs. The leasing facility was provid ed to 12 Cooperatives with a worth of RWF 459 Million.

We achieved these results due mainly to the significant contribution of the partnership under the NEP that brings together various institution s to deliver on its mandate.

Egide RUGAMBAChairman

Innocent BULINDICEO


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Financial highlights:We have continued to strengthen financial position. Our revenue grew 7%, PAT margin went from -6% in 2017 to 3% in 2018, and the balance sheet increased by 11%.

2018 “000” RWF 2017 “000” RWF % Grow

Total income 3,760,856 3,523,242 7%

Operating expenditure 3,367,862 3,217,601 5%

Opex margin 392,994 305,641 29%

Depreciation 294,657 246,510 20%

Profit before tax 98,337 59,131 66%

Ebit margin 3% 2%

Corporation tax 0 (276,308) 100%

Profit after tax 98,337 (217,177) 145%

Pat margin 3% -6%

“000”Rwf “000”Rwf

Non-current assets 1,169,105 1,960,926 11%

Current assets 27,940,915 25,129,302 11%

Total assets 30,110,020 27,090,228 11%

Equity & liability

Capital & reserves 13,464,141 13,365,803 1%

Non-current liabilities 11,454,208 9,330,901 23%

Current liabilities 5,191,671 4,393,524 18%

Total equity and liabilities 30,110,020 27,090,228 11%

Asset Quality:The quality of our portfolio showed an upward trend in our total recordable non- performing loan (NPL) rate.

Our non-performing loan ratio is a critically important perf ormance measure for the Board, and we are pleased with the Company’s continued focus on this area. BDF’s NPL ratio reduced to 12, 6% in 2018 from 14% at year 2017. This positive trend is a reflection of aggressive Monitoring & Evaluation and recovery as well as the positive response from PFI’s.

Transformation:In 2018, BDF made clear progress on a number of strategic fronts that laid the foundations for future growth in revenue, profitability and performance. We will also be looking forward to the shareholders

for unequivocal support in our ongoing efforts towards increasing the bank’s capitalization in line with increased operations to be able to fulfill our mandate.

ERP Infrastructure:For BDF to meet its operational needs and increased demand from the clients, a set of technological initiatives/projects were strengthened in 2018.

Most notable achievements were the scale in BDF’s operating platform, the delivery of essential changes in technology architecture across BDF with the use of BDF web application that contributed in the reduction of delays; The E-Archiving and Document Management System that impacted the company’s service delivery, bottom line and growth.These were achieved while maintaining the progress toward

gam1ng sustainable advantage from a differentiated customer experience. We are keenly focused on the performance of the company, as are all BDF’s employees, and we are determined to see steady continuing improvement. BDF Exempt from Corporate Income Tax (CIT): The new Law No 016/2018 of 13/04/2018 establishing taxes on Income exempted BDF from CIT. The Hon. Minister Amb.

Claver Gatete, former Minister of Finance and Economic Planning during the budget reading for the fiscal year 2016/17 noted that BDF has been included as an entity exempt from CIT.

This is a culmination of BDF’s request for Income tax exemption that began in 2012 and has been realized in 2018.


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This is in consideration of BDF’s social mandate to support the financing of small businesses, the majority Government shareholding structure, and Government Resource base.

Capacity development: In the area of SME capacity building and training, BDF in collaboration with various sponsors provided training to over 208 women and youth under the “Start and Improve Your Business (SIYB)” and “Improve Your Business (IYB) Methodologies. Establishing strategic partnerships We continued to establish strategic partnerships aimed at enhancing our ability to deliver better results. In 2018, we partnered with; New Faces New Voices, GIZ to provide training to women and Youth through our “Start & Improve Your Business” training program.

We also signed a “Green Guarantee” partnership agreement with FONERWA in derisking and promoting green businesses. We cannot leave behind the continuous seek for partnership with various financial institutions that help us to implement our daily work.

Strategy and growth opportunities:In 2018, we continued to develop various direct financing schemes to cover a wider cross- section of the SME sector that included start-ups, and youth entrepreneurs with a specific focus on the agriculture segment. This increased graduates’ self-employment and incomes in market oriented production.

BDF will keep assuming a greater role in navigating the access to finance path of SMEs across all sectors and build on existing initiatives by providing pre and post finance business advisory services to increase success rates of SME loan applicants, deploy financial products to increase access to finance and encourage financial institution s to cover more

extensively the SME market. For 2019, we shall continue to focus on youth employment initiatives with focus on SME’s.

Appreciation:We would like to express our sincere appreciation to the entrepreneurs, SMEs and financial institutions that have supported us, as well as all the staff at BDF and all branches for responding with resilience and commitment to a different tomorrow. These achievements would not have been possible without the efforts.

Our gratitude is extended to the NEP Secretariat, the Ministry of Finance and Economic Planning, the Ministry of Trade and Industry, the Ministry of Public Service and Labor, the Ministry of Gender and Family Promotion and other agencies, business and trade chambers as well as other stakeholders for their continued cooperation, trust and confidence in BDF.

We trust all our stakeholders will continue to lend us their support as we work harder to strengthen the BDF’s role in SME development and earn the trust of the government and people of Rwanda.

Best regards,

Egide Rugamba | Chairman of the Board of Directors

Innocent Bulindi | Chief Executive Officer


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TESTIMONIALS

Henri is a young entrepreneur who is the Founding Director of G5 Sky Way. The company produces Instant Coffee from fresh coffee grains. He started from Rwf 60,000 but now the company weighs Rwf 600,000 million through BDF’s agri-business facility.

Henri Carl Nsabyumukiza

Bizimana Celestin

Uwimana Claude

Vuningoma Petit

“A good project is one that meets the needs of the beneficiaries. Before initiating any business, we should do a research and know exactly what they need.” Founder of Green Treasure, chili sauce processing company - Agri-business facility beneficiary

Bizimana Celestin is the President of Cooperative COTU from Ruhango district that processes maize into floor. They are beneficiaries of PRICE grant.

Claude is a banana farmer from Karongi district. He is a beneficiary of PRICE grant. He earns more than Rwf 200,000 per month.


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The Business Development Fund was initially established as a guarantee fund to facilitate and ease access to finance with start-ups as its target group. Over the years the fund has grown into a fully-fledged Fund management firm, this meant the diversification of its portfolio along with its client base.

This vast and rapid growth entailed the introduction of new products (Grant management, Sacco Refinancing, Quasi Equity, Leasing Facility, Business Advisory

and Trainings). This also meant an increase in the number of branches and staff. However, this growth was happening faster than the evolution of the technology systems in place which meant more work input was needed to meet the day to day operations of the company as well as the client expectations.

For BDF to meet its operational needs and increased demand from the clients, a set of technological initiatives/projects were implemented in 2017.

INF ORM AT ION TECHNOLOGY

These projects were designed to respond to the current status of operations and future growth of the company.

They were mainly focused on increasing operational efficiency, improving communication, transparency and sharing of information and enabling client centred analysis and decision making.

The management of these projects also aimed at achieving the best


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return on investment on these projects given that they did not come cheap.

The BDF Web Application:During the year 2017, BDF implemented undertook a project to redesign its website and develop a web based application which would be used as a portal to serve our clients, be it financial institutions, companies, cooperatives and individuals. The web application was designed to address the following challenges the company faced;

1. Delays caused by the time lost in physically delivering applications and responses between financial institutions and BD. This challenge was affecting our relationship with the both the financial institutions and the guarantee beneficiaries.

Solution:The web application will cut down the time it takes to process a guarantee application from 2 weeks to 3 working days.

2. Some of the products provided by BDF go through one or more stakeholders before reaching BDF. Beneficiaries of these products faced a challenge of not knowing where their applications had reached at any given time. This affected customer satisfaction and deterred potential and repeat clients.

Solution: The web application will make it easy to track an application at each stage of the process and notify the beneficiary of any changes in the status of their application. This increased transparency in the process will lead to increased customer satisfaction and in turn an increased client base and company growth.

3. Data plays a very crucial and key role in decision making and efficient running of a company. It has been a challenge consolidating data

from different products as these were being managed in different systems. In addition, receiving reports from partners was difficult due to the repetition of tasks that was involved during process of collecting the required data.

Solution: The web application will consolidate all key information about our clients in a centralised environment allowing key decision makers and analysts to access and assess trends, reports, current and past statuses giving way to better informed decisions and prospective ideas to grow and improve the business.

The overall goal of this project was to have a more interactive relationship with our clients, partners and other stakeholders through an responsive, flexible and easy to access platform. We believe that a better and open relationship with our stakeholders is the key to great service delivery.

The E-Archiving and Document Management System: As we looked into the future of the company, conserving the environment became a clear and an important cause to BDF. With the climate change patterns the world is facing today, we strongly believe that we should all play a role in making the world a habitable place for the future generations. In the year 2017, BDF started an initiative to reduce the amount of paper and power used in our operations. The initiative will in turn have more benefits to the company’s service delivery, bottom line and growth. In a bid to drastically reduce the amount of paper used within BDF, an electronic archiving and document management system was procured for internal operations within the company. The document management system is used to create, share, store and process files with minimal printing or use of paper with in the company.

This solution will also provide an electronic back up of all documents within the company from the past and in the future.

Both the solutions combined will reduce the amount of paper and power used in the operations of BDF.

These will be the first steps in this direction with more initiatives to be implemented over the coming years.


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MARKETING WRITE-UPThe year 2018 was marked by “Advisory services” and trainings that were offered to PFI’s.

We partnered with Association of African Development Finance- Institutions(AADFI) that offers also trainings and together we offered a training called” SME diagnostic Turnaround” to PFI’s. Participants were all over the African continent.

We also developed a model called SPET (Staff Productivity Enhancement tool) that is offered to PFIs as well.

So far 7 banks have been trained under this model. This has marketed BDF well even outside the country.When it comes to Customer service, our trainees and AADFI representatives from abroad were taken to different parts of the country to show them around and get to learn more about our culture and the country’s history such as the memorial site as well as the liberation Museum.

As part of the CSR activities, BDF participated in the National Debate Championship.

This is a good platform for us because most of their topics are about Entrepreneurship and the country’s economy.This helps BDF to get known due to the fact that we request that among the discussions, students talk much about it. This means that students do an intensive research about BDF and talk about it. Sofar, we have seen some students with viable projects coming to us for Financial Support.

We also sponsored an annual event that brings together hundreds of Youth from various professions. There was also the Young professional summit where we called upon one of our beneficiaries to give a testimony of his journey with BDF.

As you can see, we concentrated on Youth, but at the same time without forgetting other categories of

Rwandans. We built water fountains in Ruhango district and some houses for Refugees /Returnees in Gatsibo district.

We participated in the made in Rwanda exhibition, the Agri-show in Mulindi, the provincial workshops without forgetting the districts (JADF expo).

We cannot forget to mention that we this campaigns of different products that include: Agribusiness, Credit Guarantee and the Business Clinic with Bank of Kigali, BPR, Duterimbere and Copedu.

The marketing and relationship Unit’s only mission is to make BDF known and maintain good relationship with our clients and stakeholders.

In the year 2019, we shall still focus on pushing different products as well as approaching our clients more often.


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RISK MANAGEMENT STATEMENT Risks threaten entire enterprises, not just business units, programs or processes; in today’s challenging business conditions, companies are exposed to numerous uncertainties as opportunities and risks are constantly changing.

The BDF risk philosophy is to manage risk pro-actively and ensure that all risks fall within the risk appetite and tolerance as formulated by

the board. A proactive enterprise risk management framework is important to create and protect shareholders’ value with full integration of risk management in the organization’s governance structure as well as the decision making.

BDF has developed comprehensive systems and Enterprise Risk Management to identify, assess,

control and monitor all risks related to the fund business activities.

Enterprise risk management (ERM) in business includes the methods and processes used by fund to manage risks and seize opportunities related to the achievement of their objectives.

ERM provides a framework for risk management which typically


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awareness across the fund, and facilitated BDF Management to integrate “risk” as a factor in decision making.

Business continuity Management: To ensure the continuity of the fund’s critical business functions in the event of disaster and crisis the fund strives to be operationally ready through strong business continuity management which consists of business continuity plan and disaster recovery plan. BDF has established off-site backup.

Asset and Liability:In 2018, Risk Management with support from Finance department, balance sheet risks were identified, measured, monitored and reported to the Board through Audit and Risk Committee Board Sub-committee and Senior Management.

Way forward:Risk Management unit will focus more on staff education and communication on risk management principles ‘’Awareness and communication, keep developing risk culture across the fund and enhancing risk management function with enough staff and capacity building.

involves identifying particular events or circumstances relevant to the fund’s objectives (risks and opportunities), assessing them in terms of likelihood and severity of impact, determining a response strategy, and monitoring progress. By identifying and proactively addressing risks and opportunities, business enterprises protect and create value for its stakeholders, including owners, employees, customers, regulators, and society overall.

Management of the Fund’s Key Risks: As a finance institution, BDF is not averse to risk taking. BDF takes risks that lending institutions cannot or will not take. To ensure its sustainability, BDF manage risk pro-actively and ensure that all risk profiles fall within the risk appetite and tolerance of the Board so that it can continue to fulfil its mandate

The Fund is exposed to the risks resulting from its funding structure and is also exposed to reputation, legal and compliance risks from its daily operations. BDF Risk Management was established to implement risk management process ‘’identify potential risks, assess, control and monitor them so as to avoid and minimize financial and non-financial losses to the fund.

Credit Risk Management: Credit risk arises from the possibility that a borrower is either unwilling to perform on an obligation or its ability to perform such obligation is impaired resulting in economic loss to BDF.

Operational Risk Management: Operational risk is the risk of direct or indirect loss resulting from inadequate or failed internal procedures and processes, systems, external events, infrastructure, personnel, and other risks having an operational impact; Risk Management unit enhanced the operational risk culture and

IN 2018 AND PREVIOUS YEARS BDF HAS FOCUSED ON RISK

MANAGEMENT IN ITS BUSINESS PROCESSES, PRODUCTS AND

SERVICES &WHICH HAVE BUTTRESSED THE FUND’S SUSTAINABLE GROWTH.

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FINANCIALS


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BDF, Your Business Development Partner.Call our toll-free line on 4777 or visit www.bdf.rw for more info

www.bdf.rw@bdfrwanda @bdfrwanda

BUSINESS DEVELOPMENT FUND ANNUAL REPORT

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