Cottage Industry-Small loans at the disposal of operators |17 May 2005

Following the setting up of the Cottage Industry National Policy last year, the government has made provision for the setting up of a fund to allocate small loans to cottage industry operators seeking financial assistance. In line with this, the government has this year allocated a budget of R1 million in the YES scheme, whose Board will be responsible for the processing of the small loan applications.

The loan will be disbursed by the Seychelles Savings Bank (SSB), but Mr Terry Hoareau, the manager of the YES scheme secretariat, said that for entrepreneurs to benefit they must open an account with the bank first. The loan will however be granted against a proforma invoice specifying the details and costs of the equipment to be purchased.

Loan application forms are available at SEnPa's Cottage Industry office at Camion Hall in Victoria and are to be filled and returned with other relevant documents such as the certificate of registration, proforma invoice along with the necessary approvals from health and environment departments.

SEnPA will then recommend the application to the YES secretariat and Board, for consideration and initial approval. Forms of successful applicants will be sent to the SSB for further check-ups and subsequently the loan will be disbursed. Mr Hoareau said if everything is in order it should not take more than seven days to complete the procedures and notify the applicant of whether or not he has been successful.

Mr Hoareau said that if the entrepreneur running the cottage industry is doing it on full-time basis as his main livelihood, he will require one working guarantor as security for the loan. On the other hand, if the entrepreneur is doing the business on a part-time basis and is employed in a full-time job, then the loan repayment will be deducted from his salary.

Little push to start

The purpose of the loan Mr Hoareau stressed is to give the operator the "little push to make a start," and should not be seen as a capital investment in the economic activity planned.

"The loan is capped at R10,000 because it is expected to cater for  low requirements of light economic activities," he told Business Nation.

For example if an entrepreneur is planning to start a snack business at home, the loan can only serve to buy a fryer or a cooker, but cannot be used for the purpose of setting up the kitchen.

The interest rate for the loan is 1% and an applicant can be given a maximum period of two years to complete repayment. They will also be given a grace period of two months to start repaying the loan.

SSB will have the responsibility to update the YES secretariat on repayments via monthly statements which will also be forwarded to SEnPA.

Applicants whose loans requests have been rejected are entitled to make an appeal and their cases will be taken up by SEnPA.

Mr Hoareau pointed out that once registered, the cottage industries will also benefit  from other incentives given to small businesses, which means that if for instance, an operator decides that the R10,000 was not sufficient to purchase what he requires, he can always find recourse in other financial schemes.

The YES scheme itself presents an alternative, under which they can for instance apply for up to R50,000 at interest rate of 1%.

They also have the possibility to apply for loans from the Development Bank of Seychelles (DBS) or from other commercial banks.