Outreach of Microfinance from urban and semi-urban to rural and remote areas of Uganda is the most contentious issue of industry. At the first IIE of 2007, two very different presentations were given, yet they tackle the same theme: Outreach of Microfinance. The first presentation took the avenue of technology. SEVAK solutions is a company with the mission to apply the opportunities of modern Information and Communication Technologies (ICT) to Microfinance consumers.
ICT-based payment systems, SEVAK-founder Laura Frederick explained, are an infrastructure. Infrastructure is very costly, yet mostly "non-rival", i. e. once in place, it can be used by many. Microfinance Service Providers should not compete on infrastructure, because they can't win and will in the end even harm the consumer. Rather, MFIs should collaborate on infrastructure and concentrate competition on services.
The solution of SEVAK is a remote transaction system (RTS) based on provision of low cost switches and a network of shared agents, connected through the mobile phone network(s). SEVAK is in negotiation with the latter for favourable rates (volume instead of time-based). Such agents can be merchants and shops, filling stations and the like. They would be equipped with Point of Sale Devices to handle a number of transactions, e. g. loan payments, saving deposits and withdrawals, balance inquiries. Their market research shows that these services will be appreciated by the consumer at a price of 250 UGS per transaction. However, with a low volume of the pilot, the cost per transaction currently stands at approx. 1000 UGS. SEVAK estimates the potential market size at 5m consumers.
The pilot is being run with UML, and a UML credit officer praised the experiences during the discussion, as it allows UML to reach many more consumers, and consumers enjoy better services as they do not need to travel far and/or often. Another advantage is much timelier and thus more accurate management information for UML. However, the network agents need to have a significant amount of liquidity on their account against which the transactions are cleared. Thus, the cost of cash handling comes to the shop keepers etc, and will only benefit them if they can provide the security and if they are remunerated either by SEVAK or through increased business (as more people enter their facility and expand the volume of other transactions also). There were concerns if Bank of Uganda (BoU) would allow this system as it may violate their regulations.
The Commonwealth Business Council (CBC) has ambitious plans for applying comparable technology. Yet, they want to use mainly "Automatic Banking Machines" (ABM). Different to ATMs, such machines shall offer a full range of financial services, e. g. standardised loan appraisals. It may be doubted if this is very applicable to consumers with limited alphabetisation and no central identity register. However, it shows the potential of an ITC-based infrastructure for outreach of financial services.
The second presentation took a very different approach. Joshua Lisa, District Commercial Officer of Moroto and Vice-Chairman of the Karamoja Microfinance Committee (KMFC), presented a strategy that was put together in a joint effort of the five Karamoja districts. Local governments, Microfinance Practitioners, led by Karamoja Private Sector Promotion Center (KPSDPC) with support of AMFIU and SNV developed the strategy. It is to bring up co-operative Microfinance providers (SACCOs) throughout Karamoja. A summary of the strategy is documented on pp. ??. The Karamoja presentation emphasised on the first factor in Microfinance: People and their skills and attitudes. Only if these are appreciative and reasonable towards Microfinance, the "other" factors ? technology and capital ? can become effective.