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BRAC secures $4.6m to extend cheap credit to businesswomen

The bank is targeting businesses that are hit hard by COVID-19

Kampala, Uganda | JULIUS BUSINGE | With the easing of the lockdown and slow recovery of the economy impacted by the Covid-19 pandemic, financial institutions are now looking at how to reboot businesses and put them back to their growth path.

BRAC Uganda Bank and BRAC Uganda NGO have received $4.6million from Mastercard Foundation under a project dubbed ‘COVID Recovery and Resilience Program’ to partly support small and medium enterprises that were negatively hit by COVID-19 prevention measures.

Jimmy Onesmus Adiga, the managing director at BRAC Uganda Bank told The Independent in interview during the project launch in Kampala on Sept.09 that the new initiative is intended to enhance economic access and recovery of 5,400 women group borrowers with access to microloans at a discounted interest rate.

He said out of the total project cost, $2.2million will go to economic recovery activities targeting borrowers and the bank’s digitalisation investments.

Digitization, according to Adiga, will promote social distancing as a means to prevent the spread of COVID-19. It will also help cut operational costs for the bank, but also improve service delivery.

The funds from MasterCard Foundation to Brac does not attract any interest, according to Adiga. But, he said, borrowers will be charged 15% interest rate per annum, which is 10% lower than the bank’s commercial loan interest rate, and about 3% lower than the average rate charged by commercial banks as at September 2020.

BRAC Bank has a customer base of 300, 000. Out of this number, 207, 000 are borrowers and the rest are savers, according to Adiga.

Similarly, the project will also unveil e-learning services for MasterCard secondary school scholars. The project money will also be used to provide digital training and safety protocols to improve BRAC’s health program for current and future outbreaks.

“Part of the funds will be directed to build the capacity of BRAC’s 2,891 community health workers and ensure their safety as they work to reduce COVID-19 infection rates and also support 2,139 MasterCard secondary school scholars in preparing for the national exams,” Adiga added.

George Matete, the country director of BRAC NGO said the project will be implemented using a multi-pronged approach that ensures safety, security and partnerships for parties involved.

“With the help of BRAC Uganda Bank, our interventions are uniquely tailored to suit each of the targeted beneficiaries due to their diversity in terms of financial exclusion, physical attributes as well as location displacement, to realize their potential and sustainably transform their lives out of poverty,” Matete explained.

BRAC’s capacity

BRAC has been working in Uganda since 2006 to advance women’s empowerment, provide education for children and adolescent girls, address gender-based violence issues, improve livelihoods and skills for smallholder farmers, and support people to lift themselves out of ultra-poverty through its NGO entity.

BRAC’s microfinance activities in Uganda have been carried out under a separate entity, BRAC Uganda Microfinance Ltd (BUML). But, from 2008 to 2018, BUML increased borrower numbers from approx.60, 000 to slightly over 200,000 and its branch network from 61 to 163.

In 2016 the decision was taken to transform it into a tier II credit institution, and after completing all the regulatory requirements, it received the license as “BRAC Uganda Bank Ltd” in March 2019.

Adiga said their clients are at the bottom of the pyramid who require face to face interaction which is why they have partly invested heavily in human resource base.

Officially unveiled on Sept.09, the project started in June this year and will end in the same month of next year – 2021.

“My role as CEO is to help empower communities to access financial services and prepare them for future crises,” Adiga said.

Mackay Aomu, the director in charge of payments at Bank of Uganda said the new move by BRAC is welcome and would support efforts in place to revamp businesses that were negatively impacted by coronavirus pandemic.

Aomu urged BRAC and other financial institutions to use payment systems that are risk resilient, cost effective and meet customer needs.

He said the central bank is encouraging lenders to invest in infrastructure that can be shared with other partners delivering financial products to the population, which will in the end support efforts for deepening financial inclusion. He said, no matter what, digital enabled services are the way to go.

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