Thursday, September 23, 2010

DCA Guarantee Agreement Signed with USAID!

On Thursday, September 23rd, UOB signed a DCA (Development Credit Authority) guarantee agreement with USAID (US Agency for International Development). Under this program, USAID will guarantee up to 50% of all agricultural loans, except coffee and tea, registered under the program. The total loan amount under this guarantee program can go up to $1.57 million over the next five years while this maximum loan amount may increase further if the usage is good. Currently UOB is the only active bank in Rwanda under this program.

Dennis Welder, Mission Director of USAID in Rwanda came to our office and we signed the agreement. After the signing, Dennis and his colleagues took a tour of the bank, including demonstration of the biometrics technology used for our deposit clients. He promised to come back to open a savings account.

Along with other risk mitigation programs, USAID DCA guarantee program will help us take the next step into our agricultural lending. We are currently looking at the casava sector for post-harvest management and processing. I pray that our inroad into agricultural lending will not be too rough. - Jeffrey

Saturday, September 18, 2010

Eager to Learn ...

On Saturday, September 18th, we held a training session on loan documentation and security interest registration. Patrick, UOB's Director of Legal Affairs was the instructor. Approximately 12 people participated in the training and the fever for learning was high.
They all were eager to learn, asking a lot of questions. I was glad that the training was conducted in Kinyarwanda. That is the way to go. That is the process of localization. But I was there throughout the session to provide the mental support.

I am grateful that we are building up the capacity and the teamwork. Still there is a lot of work to be done, but we are making progress little by little.
I am grateful to the Lord who has been with us throughout the process even when we do not feel His presence obviously. Lord, please give us wisdom to figure out ways to create and facilitate the mutual learning environment in the organization. - Jeffrey

Saturday, September 11, 2010

M-Pesa Story...

[A sign in front of an agent .... A typical M-Pesa agent ..... Pauline, Head of M-Pesa Operations, a briliant manager]

Everybody knows that Bill Gates is the founder of Microsoft. Most everybody knows that he and his wife, Melinda, founded their private foundation that is the largest in the world with $33.3 billion in endowed fund. In 2009, they gave $3 billion for various causes globally related to health, development and education.

I participated in a 3-day workshop in Nairobi, Kenya (September 8-10), sponsored by BMG Foundation on the topic of "Savings Initiative" for the MFI's to help the poor. Several MFI networks participated in the workshop to learn from each other and Opportunity International was one of them. I, together with the CEO for Opportunity Kenya and one of the Opporutnity International Africa Regional directors, represented the OI. Other networks that participated in the workshop included World Vision, FINCA, ACCION, Grameen Foundation and Women's World of Banking. The participants totaled 25.

The theme for this workshop was "Change Management." Traditionally, MFI's focused on extending credit to the poor. About a decade ago, a movement started to promote savings as a way of helping the poor strengthen their financial stability. To receive savings from the general public, MFIs had to be regulated by the central bank, which required significant changes in their mentality, corporate culture, MIS, attitude towards customer service, etc. Change requires a shift in paradigm and creativity.

The primary focus was on M-Pesa and Equity Bank, two legendary success stories both based in Kenya.

M-Pesa is a business division of Safaricom that owns a predominant 88% market share of the wireless communication industry in Kenya. "Pesa" means money in Swahili. Obviously M stands for mobile. "M-Pesa" means "mobile money." Now the M-Pesa subscriber has exceeded 11 million out of the country's 40 million population. Phenominal!

M-Pesa has revolutionized the payment habbits of Kenyans. Through M-Pesa, using their cell phones, they can now send money home in remote areas; make payments to buy grocery; to pay school fees; to pay for the taxi fare; to pay to the suppliers for the goods that they buy; to make donation; to pay for the utilities; etc. All instantly. Not only people can do these remittance/payment transactions instantly but also can they access to cash at one of 16,000 agents scattered around the nation. A remarkably huge network! Moreover, they have developed a way for cell phone holders to be able to access even ATMs without card and pin! How? I am not going into details. It is getting too technical, but it is working now. Amazing...

The latest product or service is the connection between M-Pesa and Equity Bank so that now people can move money between the bank account and M-Pesa account. This product is called M-Kesho. (Kesho means "tomorrow") In just two (2) months, Equity Bank opened 670,000 accounts! Incredible!

Of course, there are certain restrictions and costs. The maximum amount for this M-Pesa transactions is Kschs35,000 or $448 at the current FX rate. The costs associated with a transaction, including sending and receiving, total approximately 1% of the amount. From the standpoint of the money supplying agents, including super-agents, sub-agents, aggregators, the effective yield on their money is several hundreds percent. It is not expressed in APR, so it is burried in the name of a "transaction fee" and it is acceptable to most Kenyans for the convenience that they enjoy.

Equity Bank is another phenominon that is sweeping the country. It has been growing 50% or more every year since 2004 when it went public. It has its own 300 branches, but it is operating through a network of more than 1,000 agents that are not branches. It is called "branchless" or "agent" banking. It offers only a few savings products, but it cannot deploy the funding fast enough, thus sitting on abundant cash that accounts for 48% of its deposits. This bank does not know nor have liquidity crunch. How do they do it?
The knowhow is to make the funds avilable readily beyond the traditional cash access points. It uses brick and mortar branches, ATMs, branchless agents, cell phone M-Pesa, etc. to make their clients (they call them their members) readily access their funds and do transactions easily. The bank carries an unbelievable amount of loyalty from their customers. And it is a new phenomenon. It is expanding to neighboring countries: Uganda, Sudan, Tanzania and next year Rwanda. It is a threat to many traditional banks, but a new way of access to financial services for many poor people in Africa.

The workshop included field visits to M-Pesa agents and presentations by M-Pesa, Equity Bank, PEP, one of the aggregators, and Top Image, the company that M-Pesa uses in providing on-going monitoring and training for the agents.

All in all, it was an enlightening story, a mind-shaking challenge and a wake-up call to the way microfinance or traditional banking is done in Africa or anywhere else in the world. The bright side is that the poor people are getting the help. Praise the Lord! - Jeffrey

Monday, September 6, 2010

A 6-Hour Hike on Mt. Jali...I Made It!

Today, I joined a group of Kigali hikers to hike the tallest mountain in the Kigali City: Mt. Jali. Mr. Jali is facing the second tallest mountain in Kigali, called Mt. Kigali. Mt. Jali is approximately 2,000 meters high and we started the hike from 1,300. I was told it would be a 4-hour hike. Initially, I thought I might be pushing myself too much with a 4-hour hike, but it ended up a 6-hour hike!!! I would not have dared to try had I known that it would be such a long hike.

The group was truly global. The group composed of 4 Rwandans, 3 Americans, 1 German, 2 Irish, 1 Japanese, 1 Kenyan and 1 French. Most looked like they were in their 20's and 30's. By age, I was an odd ball, but I survived and made it.

The initial ascent was tough. We had to climb for one and a half hour on the continuous uphills of 30-45 degree. I was running out of breath and my legs were too heavy to make steps. I was wondering if I would be able to make it. I felt disappointed at myself because I thought I was keeping myself up pretty well through daily exercises, but I felt was far from being shaped to handle this type of challenge. Moreover we were climbing the hills through a small village where many children were gathering and following us. More than 30 children were following up with many in bare feet. The steep hills seemed so easy to them as they were literally hopping up the hills. Wow...

I was the last in line along with another Rwandan lady who said she was a chain smoker and this is her first hike of this kind. I was struggling. I was disappointed.
When I was feeling so exhausted to make any further move, I learned that the steep ascent was coming to an end soon and the next hour would be a gradual ascent. What a relief it was...

We finally made it to the top and had a small picnic.

We then started descending the mountain, but through a different route. It took far longer than the original route, thus lengthening the hike time by almost two hours.

It was a great feeling that I was able to finish the hike along with the young people of 20's and 30's. I felt more confident that at least I could sustain the long walk. But, I realized that it would take a lot more work to be able to hike such steep hills.

This was a great beginning for a journey to prepare to hike the Mt. Kilimanjaro in 2011.

Everyone almost crawled the last one hour, but we were glad that we finished the hike. Hooray! - Jeffrey

Thursday, September 2, 2010

District Mayor Closes a Bank Branch?

[Tenants were locked out.... This was the construction that should have been done... Mobile Branch pulled in to temporary relief.]

On Wednesday, September 1st, I was informed that one of the bank branches in Kicukiro District was closed down by a District Mayor.

"What?" "Why?" "What did we do wrong?" .....

"What?" "We did not do anything wrong?"

"Then what made him close down a bank branch?"

"Wait... wait..." "Does he have authority to close down a bank that is a semi public institution?"

The reason, as I was explained, was unbelievable. Incredible. Totally irrational and unreasonable to me.

Apprently, the District ordered the landlady of the building where our branch is located to lay tiles on the sidewalk in front of the building. The landlady had delayed the construction work due mainly to lack of funding and ended up passing the deadline, August 31st, imposed by the District. On September 1st, the District Mayor came to the building himself and placed locks on the doors of all tenants. Effectively he himself shut the entire building down.

"Have we been informed of the District's instruction to the landlady?" My questioning continued. "No."

"Have we been informed of the District's plan to close down the building if a certain action is not taken?" "No."

"It just happened", I was told. Nonsense... Total nonsense...

'How could a semi-public financial institution be shut down by a local authority for a reason that the bank has nothing to do with?' I was upset. Upset with the fact that we cannot serve our clients who have entrusted their money with us.

'How could we say to the general public that the financial stability is assured since their money is available any time they need it, when a bank branch can be shut down by a local authority in such an unreasonable way?'

I decided to bring the matter to the attention of the central bank governor. I called him at his cell phone. I use his cell phone only when there is an emergency. It was an emergency to me and to us because we could not serve our clients for no clear reason and it could adversely affect the reputation of the entire Rwandan banking system.

After I explained to him about the situation, I was expecting a reasonable explanation and a workable guidance to resolve the matter. I was naive. He agreed that it was unreasonable and excessive. But it was obvious that he was avoiding any conflict or confrontation.

I instructed the branch banking division manager to bring the mobile branch to get ready to serve our clients if we fail to convince the District Mayor to allow us to open the branch from today (Sept. 2).

We were unsuccessful eveb with our attempt to meet him yesterday (Sept. 1). So today (Sept 2), we served the clients through the mobile branch. Even that action was with the temporary verbal approval from the Vice Mayor since the Mayor was not available. We are hopeful that we will resume the branch operation from tomorrow (Sept. 3) because the landlady started the construction immediately yesterday (Sept. 1).

There is another background story behind this irrational action that the District Mayor took upon us.

The current President Paul Kagame of Rwanda has been re-elected for another 7-year term with a land slide victory. His inauguration is scheduled for Monday, September 6th. Apprently all city officials have been working extremely hard to complete all construction and decorative work in the city prior to the inauguration. The building where our branch is located is prominent in the area. Thus, it drew special attention from the District and when the District's instruction did not produce results, the Mayor took extreme actions that ended up falling hard on the laps of innocent tenants, including a semi-public financial institution.

Since I was convinced that such nonsense action was not the intent and instruction of the President Paul Kagame, I could swallow it. But it was not easy. I had to remind myself several times: "T.I.A. - This is Africa."

Moreover, there are plenty of nonsense situations that are happening in our lives. ... Somehow the murder of Jesus came to my mind. The murder of Jesus was plotted by the religious leaders and strongly supported by the crowd who experienced His miracles and were anxiously waiting for the Messiah, not knowing Jesus was the Messiah. It was a total, absolute and reidiculous nonsense, if you come to think of it a little deeply. He was murdered on ridiculous charges. Even the Roman Governor Pontius Pilate claimed that he could not find any sin in Him. Nonetheless, He was crucified. But we know now that it was the divine redemption plan for sinners like you and me! ... Amazing grace...
Well... I feel a lot better now in swallowing this incident. Thank you, Lord! - Jeffrey