Fund to cut rates to SMEs

Johannesburg - The Umsobomvu Youth Fund (UYF) will take the lead in easing interest rates in SA on Tuesday when it announces a cut in the interest rate it charges funding beneficiaries.

The UYF will announce a 250 basis point (bps) cut in the rate it charges the young entrepreneurs it funds, Fin24.com has learned.

That would take its average loan rate closer to the prime interest rate charged by commercial banks. The UYF's rates are usually higher than those charged by commercial banks.

The SA Reserve Bank's monetary policy committee is widely expected to cut interest rates by a minimum of 50 basis points when it meets later this week.

Speaking at a meeting of beneficiaries two weeks ago, UYF CEO Malose Kekana said: "We've decided to ease the burden on our entrepreneurs by cutting interest rates. [Reserve Bank] governor Tito Mboweni can follow us on this one."

The move was aimed at softening the blow suffered by small- and medium-sized enterprises(SMEs), owing to the high interest rates and slower business activity caused by the global financial crisis, said Kekana.

UYF helps fund young South Africans with start-up businesses but it has seen many of its beneficiaries struggling with repayments following recent economic conditions.

The rate announcement news comes shortly after the UYF revealed that only 1% of the SA government budget is spent on youth enterprises or youth empowerment schemes. This is despite the fact that the youth makes up about 40% of the population.

- Fin24.com