Hi everyone,
I spent a couple weeks with our branch offices in Kasese (western Uganda) and Kabale (southwestern Uganda by the borders with DRC and Rwanda). That area of the country is beautiful. Both towns are situated along the Rwenzori Mountains and near two big tourist destinations – Kasese is right by Queen Elizabeth national park and Kabale is right by Lake Bunyonyi and Bwindi Impenetrable Rain Forest.
My time in Kasese was a good learning experience about the local microfinance environment. I was kind of surprised to see how much competition there was especially in the urban areas. This makes sense though, as it allows the MFIs to lower costs as they serve a much more concentrated population. Microfinance, in general is a low margin business. The cost difference between making a $100 loan and a $10,000 loan or a $50,000 loan for that matter is not significant. So with much lower interest income from a $100 loan, the profitability of the institution depends on its scale and the volume of clients it can serve. This is another reason why interest rates in microfinance are pretty high (in addition to the risk-level of the loans).
However, there are downsides to focusing on urban areas. In most urban areas, there have been several microfinance institutions making loans for the last 5-6 years. The individuals in town have learned the ins and outs of the microfinance industry. For instance, they know that the MFIs have no real way to verify that they have not taken a loan out with another institution. This leads to people running effectively a Ponzi scheme whereby they take a loan out from one institution, consume it instead of putting it to working capital, and pay the loan back with a loan from another MFI. The client base also knows which MFI will crack down hard on them if they default and which ones will not (or how long they can wait until they have to repay the loan).
However, there are some benefits. First, the increased competition has caused a drop in interest rates which benefits customers. Also, in order to lower the risk profile of Five Talents’ portfolio in Kasese, our loan officers have started to go further out into the rural areas where other MFIs do not currently operate. For the most part, these individuals have never had access to capital from MFIs and are now able to benefit from borrowing at reasonable rates from an MFI as opposed to the extremely high rates charged by local moneylenders.
It was great to be able meet some of our clients in the area. I went hiking in the Rwenzori Mountains with one of our loan officers to reach our clients that live in mud huts up in the hills. The area was unbelievably beautiful. Looking around at the top of one peak, I could see the extent of the mountain range and out in front of me was Queen Elizabeth national park. Unfortunately, I forgot my camera so I don’t have any pictures but I do have some pictures of Kabale. Kabale was pretty as well but not as mountainous as Kasese. Here are some pictures of Kabale:
Between travelling from Kasese to Kabale, I spent the weekend at Lake Bunyonyi. Lake Bunyonyi is a popular resort lake that has 29 islands. It is the deepest lake in Uganda at approximately 6,500 feet deep. Although its uninhabitable to fish, the lake has tons of crawfish (probably the only place in Africa you can find crawfish). It was a nice surprise to be able to eat crawfish after spending all week eating local food for lunch and dinner. Here are some pictures of Lake Bunyonyi:
I have a couple funny stories from the last few weeks. Since I’ve been here I’ve grown my beard out which is a foreign look to most Ugandan children. As was the case when I went to Zambia the kids (and even some adults) will approach me to let me know that I look like Jesus or Chuck Norris. A couple weeks ago, I went to church with Rosie Bryan and Kate Kingman who were in Kampala with an organization called Empower African Children. There was a little Ugandan girl sitting in her mom’s lap behind Rosie that pointed to me and asked her mom, “Why isn’t Jesus preaching?”
Empower African Children is a pretty neat organization. They provide scholarships for orphaned and disadvantaged children in Uganda to go to one of the best secondary schools in the country. I was pretty impressed when one of the kids, a 16-year old boy, gave me a lecture on the importance of saving and investing my money.
The other story had to do with two kids that I always see playing on the dirt road that leads from my house to town. They are always coming up with creative games and there was one that reminded me of something my friends and I did in high school. A couple times when it iced over and school was cancelled, we took a water ski rope tied it to the trailer hitch on Robby’s old Yukon and used either a trash can top or the Myers’ old sled to ride behind the car. These kids had a similar idea but obviously had to use different means. So they took a rope, tied one end to a cow and used a yellow, plastic water jug as a sled. One boy would sit down on the water jug and hold on to the rope while the other boy ran alongside the bull, slapping it until it started running. It was hilarious and I was able to take a couple pictures:
The other story had to do with two kids that I always see playing on the dirt road that leads from my house to town. They are always coming up with creative games and there was one that reminded me of something my friends and I did in high school. A couple times when it iced over and school was cancelled, we took a water ski rope tied it to the trailer hitch on Robby’s old Yukon and used either a trash can top or the Myers’ old sled to ride behind the car. These kids had a similar idea but obviously had to use different means. So they took a rope, tied one end to a cow and used a yellow, plastic water jug as a sled. One boy would sit down on the water jug and hold on to the rope while the other boy ran alongside the bull, slapping it until it started running. It was hilarious and I was able to take a couple pictures:
