Briefing: The Ugandan CrossRoads Construction Guarantee Fund: key achievements and impacts

Abstract

Limited access to finance can often be a significant barrier to the growth of small- and medium-sized enterprises (SMEs) in the road sector in developing countries. Financial institutions are often reluctant to lend to domestic road contractors or do so at high interest rates accompanied by onerous collateral obligations. This retards the development and growth of a competitive roads industry, which in turn reduces the overall economic growth. The Ugandan CrossRoads Construction Guarantee Fund (CGF) was established to improve access to finance (bid bonds, performance bonds and advance payment guarantees) by small- and medium-sized local road contractors. The CGF was able to build confidence and trust among the key players in the road sector in Uganda. After running for a mere 4 years, the financial market was completely transformed to a point where commercial banks now provide bonds and guarantees to contactors within 24 h of application, provided that all the required information is availed in the application. A number of key lessons have come out of the Ugandan CrossRoads CGF experience, which should help inform the design and implementation of similar interventions, particularly in developing countries. One of the most important lessons is that a relatively low-cost development intervention can lead to long-term, sustainable, positive behavioural change in the market.