The European Investment Bank (EIB) has offered a further $16.5 million to Uganda’s Housing Finance Bank for lending to small and medium-sized firms.

The credit line will be restricted to firms active in long term investments in manufacturing, agriculture, and tourism sectors, deemed to be critical for economic growth, job creation and reduction of poverty in the country, the EIB executives said.

“Small businesses need to invest to create jobs and explore new business opportunities. The new partnership agreed will benefit companies across Uganda operating in abroad range of sectors and builds on successful past cooperation with the Housing Finance Bank,” the EIB vice president Pim van Ballekom said.

Ballekom said EIB is committed to supporting private sector investment across East Africa, through offering long-term loans to microfinance institutions at a negotiable interest rate, with up to ten-year repayment period.

The new funding is being extended through the East and Central Private Enterprise Finance Facility amounting to $200 million.

The loan facility is the second lending programme in Uganda by EIB managed by Housing Finance, having successfully utilised $4.32 million credit offered to the latter in 2010 financing 48 projects.

Mathias Katamba, the Housing Finance Bank managing director said the new credit will strengthen the banks’ capacity to extend long term loans to its customers with repayment period of up to ten years based on the prevailing interest rate on the market.

Currently, Housing Finance Bank is offering loans to its customers at 18 to 21 per cent interest rate per annum depending on the nature and risk of the business, Katamba said.

Similarly, EIB also extended a $35.4 million loan to Uganda’s Crane Bank a fortnight ago for the third time for lending to SMEs.

In the previous schemes, EIB lent Crane Bank $3.7 million in 2007 and $15.1 million in 2010.

READ: EIB offers $35m credit to SMEs in Uganda

Over the past five years, the EIB has provided over $507.74 million to 26 different financial institutions in East African including commercial banks, development banks and micro-finance institutions through dedicated SMEs and micro-finance credit lines.

Last year, the EIB provided a further $101.2 million in loans to small and medium-size enterprises across East Africa. The credit line was disbursed through 12 commercial banks in the region including Family Bank and Prime Bank in Kenya, DFCU in Uganda and KCB in Rwanda.

READ: Region’s SMEs to receive $101m in loans