Ugandan lenders think small

By Orla Ryan
Kampala, Uganda

Sometimes, alleviating poverty is better done with small doses of cash than with multi-billion-dollar largesse.

Micro-finance is one of the fastest-growing sectors of international aid, offering loans to cash-strapped borrowers.

BBC News Online takes a look at one micro-finance project in Uganda.

Brand new and nearly paid-for

Abii Clinical Laboratory has one of an estimated three Sysmex haematology machines in Kampala.

The one-room Abii Clinical Laboratory is at the back of a medical centre in Wandegeya, Kampala's student district.

The Sysmex machine sits on a side counter, about as big a computer printer.

Victor Kajumba is a clinical laboratory officer, one of the laboratory's three staff members and only one on duty when I arrived.

He enthuses about the machines' capabilities. "It tests blood, you feed in blood, it gives you all these parameters," he says, showing me a white receipt.

"Red blood cells, amount haemoglobin, white blood cells and amount of platelets."

This 33m-shilling (£11,600; $19,000) piece of kit will allow Abii better to diagnose illnesses such as leukaemia and anaemia, and has already resulted in a surge in business for the lab.

Usually seen as too small to qualify for bank finance, Abii was able to lease the machine from DFCU bank via a UK-backed micro-finance programme, the Challenge Fund.

Lease of life

For Abii, the lease of the Sysmex was a finely judged business decision.

"We feel the pain of paying for this machine," says Mr Kajumba.

"If people didn't know we had this machine, they wouldn't be coming back. We would be in business, but not to this extent.

"It was expensive for us, but then we had no choice."

The rise in business - caused by doctors increasingly referring diagnostic work on to the lab - should be sufficient to allow Abii to keep up its Sh1.3m monthly payments.

If the laboratory meets its instalments for the three years of the contract, it will own the Sysmex.

Small is beautiful

DFCU has long been a player in the leasing market, but has only recently started doing business with less creditworthy smaller clients.

Micro-deals are paying off for DFCU

Two years ago, it received £1m from the UK Department for International Development (DfID), money it matched with an equivalent investment of its own.

The £2m was to fund a venture leasing equipment to small businesses, especially in rural areas.

"I could not convince the board to go into such a risky venture without the kick-start of DfID," admits Juma Kisaame, DFCU general manager.

Previously, DFCU's typical client borrowed $25,000-250,000, a market where aggressive competition was driving down margins for lenders.

Now, DFCU's target client borrows $1,500-40,000.

Home-grown

The beauty of leasing, Mr Kisaame says, is that it suits the many Ugandan businesses that have no collateral - the equipment itself is the main security in the deal.

Under the project, DFCU has lent Sh5.6bn in some 320 deals.

So far, the recovery rate has been 96%.

And although DfID funding expires in December, Mr Kisaame says DFCU will remain in the market.

"We start with them when they are very small. In two years, they are back with a deal of $30,000-40,000.

"We are growing our own market."