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SMEs should open up to financial service providers to beat COVID-19

Samuel Ocanya is the head of financial inclusion at Letshego Uganda, a microfinance company that offers SME, mortgage and education loans among other lending products. He spoke to Julius Businge on how small and medium enterprises can overcome the COVID-19 crisis.

Most businesses have reported a drop in revenue and overall negative performance due to the COVID-19 crisis since March last year. How has Letshego fared?

Letshego Uganda Limited has withstood the Covid-19 pandemic quite firmly. As a lender, our biggest income is from the interest we charge from borrowing customers. Interest income was obviously affected because we gave repayment holidays to more than 50% of our customers. That notwithstanding, we were able to remain sound, with sufficient liquidity in Q3 and Q4 when we started seeing a rebound in certain sectors of the economy. By end of 2020, we were back to our normal lending level.

Financial institutions have come up with different products targeting their clients to recover from coronavirus hit. What are you offering?

Our response has not been by creating new products. Instead it has been on three fronts including repayment holiday for some customers in education sector; restructuring facilities to suit current repayment capacity and refinancing businesses. We have also enhanced our digital capabilities to enable customers apply for facilities online.

How would you advise SMEs in terms of recovery strategy to bring back their businesses to normalcy-post-COVID era?

They should mind about quality of service/goods that they avail to their clients. These must be excellent so that the customer does not go for substitutes. SMEs should look to collaborate with other SMEs that are in the same value chain. They should not try to be a solution for everything. Owners should live within their means and avoiding flamboyant lifestyles. They should reinvest profits made back into the business. They should always keep record of their transactions. Whenever they have a conversation with a lender, they should disclose whatever challenges they are facing.

How are you dealing with your clients who are having difficulties in meeting their loan obligations because of the COVID 19 challenge?

For those businesses that were closed, we extended holidays – schools and those in their eco systems that is teachers, suppliers and bars. We had to re-finance some customers whose businesses have shown an upturn because they still have installments to pay. We refinanced to boost their finance capacity. For some facilities, we have had to restructure and reduce the installment amounts.  We have also rendered advisory services to our customers because we know that customers with facilities in different financial facilities can deplete capital.

To what extent would you say that your business strategy as Letshego is supporting financial inclusion in Uganda?

We are playing in this space greatly through the group loan methodology wherein we are able to reach out to SMEs that have challenges with collateral. We are able to mobilize these groups, teach them how to run their businesses, handle credit and have been able to reach a lot of women and support them with credit even when they do not have the desirable kind of collateral. We are also looking to launch some digital solutions soon to financially include more Ugandans.

SMEs are a target for most lenders in the market today. Why should they -SMEs- choose you instead of others?

As you can see from our tagline, we are looking to improve the lives of whoever we get in touch with. As an institution, we are committed to putting the customer first and providing an excellent service at affordable rates.

How strong is your financial muscle like to further extend credit facilities to the satisfaction of your target market?

We are a very solid company as Letshego Uganda. In fact, this year we are looking to grow our loan book nearly 50%. We are a subsidiary of Letshego Holdings Ltd based in Botswana with a market capitalization of about Shs500billion.

As businesses recover from COVID 19, what should borrowers have in mind as they seek financial services from Letshego?

They need records of their businesses; they should minimize speculation as they come to borrow; transparency is very critical for both parties. After getting the facility, they should ensure to have a good payment record to be able to build a good borrowing record needed in the future.

Any plans going forward?

We intend to lower interest rates and provide incentives to the good paying customers. We intend to keep our robust and quick decision making process since we do it locally.

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