New Microfinance Revolutionizes Uganda’s Business Financing

1. The Tony Elumelu Foundation (TEF) recently selected Vendor Capital Finance Limited, a brainchild of Anne Hope Anguyo among Africa’s 1,000 growing enterprises to watch in the Financial Services category.

After making to the list, Anguyo will receive seed capital worth US$10,000 (about Shs35m) in addition to training.

Business Focus had an inclusive interview with Anguyo, about what Vendor Capital Finance Limited is all about and how it is changing the way of financing business not only in Arua, but the whole of Northern Uganda.

Below are the excerpts of the interview;

Q:  Briefly tell me more about Vendor Capital Finance Limited?

A: Vendor Capital Finance Limited located opened on the 1^st of April 2016 and it is based in Arua town.

Our business model was built on three aspects namely; capacity to meet the demand for credit facilities without the red tape typical of financial institutions in Uganda; formal and structured approach to the business of providing credit for businesses and individuals who often find themselves dealing with unscrupulous or exploitative money lenders and strategic business model that would seek to have a multi- tiered approach to the business of credit: building itself from the most basic of formal credit institutions to a financial model capable of offering different credit and savings services as well as financial consultation, fiscal management and investment services.

Q: What inspired you to start this microfinance?

A:  The strategic location of Arua District bordering the Democratic Republic of Congo and South Sudan makes her a business hub.

This, therefore, has created a lot of business opportunities across the border and within.

Secondly, the presence of the South Sudanese refugees in the West Nile region of Uganda where Arua is located has also created business opportunities in areas of construction, supply of consumable and non-consumable items, transportation among others to the refugee camps.

These factors have therefore driven the demand for credit dramatically.

More importantly, they have created a situation where there is viable demand for credit so as to facilitate the process.

The financial sector struggles to meet this demand for various reasons: formal financial institutions like banks often are risk averse and therefore have terms that are difficult for a typical business man and woman to meet.

The institutional processes in accessing credit involve a significant amount of red tape or bureaucratic process that act as a deterrent to a potential customer.

It was this reason that gave me an insight (being a former Banker for six and a half years) into forming Vendor Capital Finance Limited to make the credit process quick and convenient.

Q: What products and services do you offer?

A: Currently, we are offering short term loans (1 to 2 months), financial literacy trainings and formulation of business plans.

Q: What makes your products and services unique?

A: Our Mission as Vendor Capital Finance is ‘to work for the success of the people we serve by providing our customers reliable, affordable and fast services that best satisfy their needs’.

Our Vision is to build a unique microfinance service focused on providing creative solutions to the business challenges of micro, small and medium sized enterprises.

We also have core values of professionalism, integrity, teamwork, innovation and customer focus.

Therefore, we do not look at this just as a business to make money but a service so as to positively impact on our customers.

We treat our customers with a touch of professionalism from the very moment they step in our office to the time they refund the facility borrowed, to the time they decide on the kind of business to venture into and also check on their investment progress.

Q: There’s a general view that microfinance institutions charge higher interest rates compared to banks.  How do your interest rates compare with the market?

A: Before we opened the business, we carried out a general survey on the interest rates in the market and ensured that we set a rate that does not seem exploitative but rather is affordable.

We continue to carry out research on this. Currently, in the Arua market, we have the lowest interest rates.

Q: What’s the source of your financing?

 A: The initial capital was put in by my two brothers; Engineer Joel Aita and Engineer Robert Andama, who are both founding partners and directors. They continue to support the business at the same time proceeds from the business are rolled back into the business.

Q: The banking sector has found it hard to recover loans in the last few years. How do you ensure your loans are repaid?

A: Our credit officers who handle the process from appraisal to recover are well trained and knowledgeable hence they handle recovery aggressively.

We also maintain a strong relationship with the customer by doing follow ups on them with regular phone calls.

We take collateral for every facility given which gives a fall back for the company as last resort.

We also take personal guarantors who sign as witnesses for the borrower with a clear note that if the borrower fails to pay, the guarantor becomes responsible for the facility.

Q: What major challenges are microfinance institutions facing?

A: The general perception that microfinances exploit people with high interest rates and rude recovery processes scares away potential customers.

There is no guidelines on the question of what a formally registered money-lending company can charge its clients as interest and associated charges.

Also, there are no statutory tools in place designed to deliberately support non deposit taking financial institutions with credit functions, which means they are left on their own with regards to resource management and can struggle during a liquidity squeeze.

The obvious one is competition from the commercial banks (Arua has 11 Banks), Deposit taking micro finances , non-deposit taking micro finances, micro lending, informal and informal money lenders and the village savings and loan associations.

Q: What are your growth plans?

A: In the next 5 years, Vendor Capital Finance Limited looks forward to having 10 operational branches (six being in West Nile) and the four in the major towns of Northern Uganda (Gulu, Lira, Kitgum and Amuru).

Secondly, Vendor Capital Finance should be able to offer employment opportunities to over 150 people.

The long term plan is to grow into a non-deposit taking micro finance (8 years), a deposit taking micro finance (12 years) and later a Commercial Bank (20 years). This is the strategic plan for growth.

Q: Your last word…

 A: Thank you for giving me this opportunity to speak about Vendor Capital Finance Limited.

We want to positively change the lives of our people by growing there businesses, enabling them to have a wider approach to savings and investments and also by offering employment opportunities. We aspire to be the Best Finance Partner in Uganda.