3 May 2018

Uganda: Rural Challenge Fund Eases Access to Finance

Ugandans in smaller business entities accessing affordable finance have increased, thanks to the Uganda Rural Challenge Fund (URCF) courtesy of German KFW Development Bank and the Frankfurt School.

At the close-up workshop for the fund last week, leaders from financial institutions that were granted the fund said it had been crucial in helping reach more rural people. The fund has been running for more than five years.

Run by aBi Trust Uganda Limited, the fund totalling up to five million euros was advanced to companies, financial institutions, NGOs, and Saccos that could help reach unbanked population and small enterprises.

At least 17 companies participated. Finca Uganda managing director James Onyutta said they received 233,000 euros and used the money for micro-energy loans and to develop their credit scored card system which ensured that they collected unique data of the people in small enterprises. They did this with credit reference bureau Compuscan.

With this, they managed to reach 89,000 people and get 18,000 new borrowers into the system.

"It also improved on our processing time. We now do one-day approval [of loans] for the repeat customers."

Many local people missed out on credit because they are not in formal banking institutions or they have no data that capture their level of transactions or earnings where lenders can base on to give them money. Data captured by Finca can help to get some people into the credit-worthiness fold.

Onyutta said using their calculations based on the score card, "you find that we price favourably for these particular customers who are regarded risky".

Timothy Akiiki, the Postbank manager of strategy and partnerships, said the institution used the funds to strengthen its mobile van banking. Using the van, he said, at least Shs 2.17bn in loans were given out while 45,000 new customers were registered.

"It is a true replica of a bank on wheels," Akiiki said. "The customers are used to it. Customers registered for that channel [van banking] are also known for phone banking."

Lawrence Ssentongo, the URCF project manager, said they experienced a couple of challenges, including the fact that there was limited absorption of the funds available.

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