Living in Uganda

For once, here’s more of what I have experienced here in Uganda.

Living in Uganda
After I had landed in Kampala, my volunteer group had a chance to visit Makerere University which was a boda ride away from the city center. Makerere University was established in 1922 and is the oldest university in the Eastern Africa. We toured the campus and met friends of my staff/guide who were attending there…

Few days later, we drove from Kampala to Masaka where I am residing now. About half way through our 3 hour drive, we reached the Equator – Masaka is located about half a degree south of the Equator.

As seen in the picture below, there were three funnels – each located in the northern and southern side of the equtor as well as one on the Equator. We poured water and saw that water spun counterclockwise on the southern side and clockwise on the northern side…

The town of Masaka is a small town seen here – you can run into cows, storks, goats, etc while trotting around the area. You will also run into lots of schools housing tons of kids who call out “mzungu” every time you pass by.

And often times you see on the walls of schools there are slogans like this:

This is unfortunately due to the high rate of HIV / AIDS so it’s not uncommon to see ads that talk about “breaking the sexual network and living a healthy happy life.”

Here is my organization – FSD - which is located in the town.

My local FSD staff – Sarah – working hard here.

Here is where I live with my host family – awesome house that would be even better if it had a running water and in door bathroom….

Security in Uganda

In general, Uganda is very safe and crime consists of theft and pick pocketing. However recommendation is that you don’t travel late at night – here you will find street lights do not exist. Popular Nokia phones have an LED light built in…

On the third day here, we were negotiating a ride on a boda when my guide had his bag pack unzipped – he chased after him and tackled him to the ground… at which point the crowd came out to administer mob justice. Here due to a lack of strong rule of law, people become vigilantes and act accordingly. Often the thieves who get caught will be severely beaten, and some die. Our thief fortunately weaseled his way out and disappeared.

Microfinance and Its Challenges

I thought I would take a little bit of time to go over concepts related to the field of microfinance.

What is Microfinance?

Microfinance is a global initiative to provide financial services to low-income clients who lack access to basic banking and related services. Microfinance institutions target the poor and near-poor families by granting very small loans to borrowers, taking little or no collateral. Some common microfinance practices are:

• providing group lending and liability
• establishing mandatory savings requirements
• increasing loan sizes once existing loans are repaid fully and on time and implicitly guaranteeing access to new loans

In summary, microfinance movement aims to provide the poor, including those who lack credit history, with permanent access to financial services ranging from credit and savings to insurance and transfers.

Difference between Microcredit and Microfinance?
Microcredit describes small loans made to borrowers (often unsalaried) with little or no collateral.
Microfinance is a term that includes microcredit, savings, insurance, and other financial products.

Who are these borrowers?
Typical borrowers are poor and often lack a dependable sources of income. As a result, they have no credit or assets that can be used to gain access to banking systems. These individuals are usually self-employeed and work and live at their homes.

Also they generate income through operating small shops, street vending, crafts store in urban areas. For those who are out in the rural areas, most live by farming.

What are the benefits of Microfinance?
Access to credit helps the poor to allocate capital for dry times when access to essentials like food, clothing, shelter, even water is lost. In addition, when emergencies take place, credit can enable the borrower to manage events like sickness or natural disasters. Finally I have witnessed firsthand that women are empowered and gain rights like ability to manage finances that were once denied.

Why are the microfinance interests rates not lower?
This is due to the fact that the total cost associated with making small loans are much higher than large loans. The time it takes to complete 100 small loans versus 100 large loans may be the same except the profits are much smaller for small loans. Also, loans are considered higher risk since borrowers frequently lack credit history. The distribution of funds may be difficult if the borrowers live in rural or remote areas. I have also taken bodas out to rural villages that may only be accessible by walking or bodas.

Do savings services also help people?
Microfinance as mentioned above includes savings as one of its offerings. Without savings, the poor will hide cash in mattresses or holes or purchase jewelry or valuables that can be sold later. Two huge drawbacks exist - the goods substituted for cash are illiquid and stockpiled goods (including cash) are at risk of theft, depreciation, or accidents. Savings services offer reliability and convenience.

Challenges

I am beginning to discover that there are still many lessons left to be learned and obstacles to overcome.

Here is a list (non comprehensive of course) of challenges that practictioners of microfinance face today.

• Some institutions seek to gain profits through confiscation and selling of collateral when the loans become deliquent.
• Many organizations lack tools and know-how to assess viability of potential loans
• Borrowers pay kickbacks to loan officers for expediting and approving loans.
• Organizations approve loans without providing resources or technical expertise to the borrowers.
• Individuals are unaware of the terms and conditions of the loans because they are semi-literate or the loan officers fail to share information. Access to information is asymmetric. This means people often take out loans without understanding the short and long term implications.
• Borrowers often live in remote areas so that they need to travel far to make payments or savings. Especially in Ugandan towns, farmers simply do not save because they may spend up to 50% of their intended savings on transportation.
• In many markets, there are multiple microfinance organizations that compete for the same borrowers. As a result of this market concentration, the borrowers take out multiple loans, often to service existing loans. This diminishes incentives to pay and weaken the risk-mitigating effects of small loans.
• Due to the explosive growth of microfinance institutions, staff and employees were often added to the organization without providing extensive training. As a result, many systems and controls in these microfinance organizations no longer function properly as safeguards to abuses and malpractices. Here's a quote from the field,"Any organization that grows beyond its supervisory capacity can end up facing high defaults."
• Many smaller institutions solely rely on paper work and processes are manual. Without automation, manual entry decreases efficiency and severely hinder efforts to improve accurate reporting and transparency.

In conclusion, if you are willing and able, microfinance is a field that will offer plenty of challenges and problems to solve... Next blog will cover the potential solutions.

Kampala - Capital of Uganda / Methods of Transportation

Kampala is the capital of Uganda with a population around one million. This city has all the amenities that you would expect in a bustling city - from fast internet cafes to different restaurants that serve Chinese, Thai, and of course Southern Fried Chicken.

One interesting topic is methods of transportation. The locals as well as mzungus (foreigners) travel by these three options:

• Boda bodas – Small mopeds or motorcycles that can be found in almost every street corner. Bodas are considered most dangerous since the drivers have utter disregard for traffic laws and incoming traffic. Drivers often are self taught and have no insurance / license to operate the vehicle. It is true that the bodas weave in and out of traffic jams but they will get you to your destination the fastest. The name boda boda comes from the fact that many years back, bicycles ferried passengers between borders of countries because the distance (no man’s land) between the borders were kilometers apart. These drivers called out “Boda Boda” (border border) to potential passengers – now the bicycles have been replaced by scooters.

• Matatus (taxis) – Matatus are small mini buses that officially carry 14 passengers (though frequently the driver will try to squeeze as many as possible), and travel along the same routes. The buses are about the size of Honda Odyssey vans and are usually white with a blue stripe around them. There is always a driver and a conductor who will hang out of the side window calling for passengers or calling out the destinations. While safer than bodas, matatus are still somewhat dangerous as drivers also speed and often drive recklessly.
• Special Hires (also called taxis) – White sedans that lack meters or markings. These are like taxis in the US and you can also book one by phone if you happen to know a drivers phone number. They drive around town and will call out to potential customers. These are probably the safest method of transportation but will generally cost the most.

Interestingly enough, most cars here in Uganda are Japanese. 90% of cars are Toyotas and rest are Nissans or Datsuns.

Foundation for Sustainable Development

Currently, I am working with an organization called Foundation for Sustainable Development (FSD).

FSD is a non-profit organization based in San Francisco that supports the work of local Non Governmental Organizations (NGO) in the developing world through volunteer placements and grant making projects. FSD places volunteers from the US with internships in Asia, Africa, and South America. Volunteers work with local NGOs to implement a project during the internship with technical support from FSD staff.

Programs offered are:

• microfinance
• health
• environment
• youth and education
• women's empowerment
• community development
• human rights

For my internship, I will be focusing in the area of microfinance and working with a local organization called South Buganda Teachers SACCO (savings and credit co-operative).

http://fsdinternational.org/