Commercial bank status is top on our agenda – EFC MD

EFC Uganda Limited also known as EFC Uganda is a microfinance deposit-taking institution in Uganda and has been operating since 2012. The company’s Managing Director Shem Kakembo spoke to The Independent’s Julius Businge about their business.

What is your description of EFC as a business as we speak?

Our business model focuses on small and medium enterprises. We acquired our MDI license from Bank of Uganda in 2014, before then we were licensed as a money lending institution under the magistrates’ courts. Our focus is entrepreneurs with verifiable businesses who wish to grow them. We therefore do not do consumer lending. Our customers range from those requiring microfinance solutions say small loans all the way to lower tier of banking. We think ourselves to be a quasi-microfinance player because we do not exactly do the very small loans or what you would call bottom of the pyramid lending. We do not do loans below Shs5 million. We lend up to Shs100 million which was made possible by a capital injection of Euros 2 Million which was made by our shareholders in March, 2018. We are currently largely playing in the Kampala and the greater Kampala metropolitan area. We have plans to expand to other places.

 What have you achieved so far?

In 2014 we received an MDI license from Bank of Uganda which we recorded as a big achievement because it allowed us to mobilise deposits from the public and it continues to give us an opportunity to grow the organisation. In March 2018, we raised additional capital in the amount of Shs9billion which made us one of the most capitalized supervised institution in the land.

What is your general assessment on the uptake and performance of the microfinance sub-sector in Uganda?

This market grew at about 8% in the second last quarter of 2019. Our own business grew in excess of 120% in 2019 largely because of the way we approach the market and serve our customers. We are growing by leaps and bounds because of our fast service. The number of players has increased but so have the number of customers. One of the reasons that the government proposed was the introduction of a regulator for microfinance players not supervised by BOU.

 What is your position on the proposed regulator?

It is a step towards the right direction. Persons who intermediate other people’s money ought to be regulated because in Uganda we have experiences of SACCOs and other small financial institutions disappearing with people’s money. We hope that whoever ends up regulating this sector is competent enough to deliver the service.

Why should one consider accessing your services in this competitive market?

We have the fastest turnaround times in the industry. We appraise a business in a few hours to make a decision to lend to you. The kind of risk we take on our customers, many of the banks in Uganda do not. We are big on digitization. This year, our customers will be able to apply for loans via an app. We understand that our customers are busy and they have limited time to move physically to our service points.

Profitability of the financial sector in the past five years has been negatively affected by the upward trend of non-performing loans. How have you fared?

The country has been going through interesting cycles. In 2011, interest rates went through the roof because of political and other factors. But in 2016 this situation was better managed. We saw interest rates starting to come down which means the central bank had learnt their lessons and did a very good job. Industry NPLs are now in the region of 3-5% of total loans which is not bad given where we have come from. The market should know that interest rates are driven by the cost of doing business which is relatively high in Uganda. With agent banking however, we should begin to see the cost of doing business come down. We are pushing the central bank to open agent banking space to all players in different tiers. With inflation targeting, we think the central bank has done a very good job in containing inflation below 5%. The economy is projected to grow by about 6.3% this year and these are very healthy growth figures.

What are the top three sector challenges that you face as a business and how best should those with authority intervene?

The cost of doing business is still high because of expensive inputs e.g. power the supply of which is also sometimes unreliable. The other is the high cost of internet and because, a lot of services that we do require internet we feel the pinch.

How is EFC embracing the popular talk of digital revolution?

With the digital revolution and how we are planning to deliver our products and interact with our customers, the requirement of a physical branch is shrinking. But given our business model, a presence in an area is still important. We want to go paperless in 2020.

What should the market expect from EFC in 2019?

In late 2019, we will be applying for a commercial banking license to be able to add new products and services to our current offering. The new products would include forex and other trade related services.

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