5.8 So far so good in Uganda: Enterprise solutions to poverty
5.8 So far so good in Uganda: Enterprise solutions to poverty
pace of capitalisation in Uganda has been very
rapid, indicating interest in the market and an
encouraging depth of demand. UEF will be fully
committed before the end of 2005 – well before
the original close-out date.
For UEF, out of more than 160 deals closed, nonperforming
investments are running at 2% and no
write-offs have yet been made. The expected net
return on investment of 20% on a portfolio of
deals ranging from $10,000 to $400,000 (in
Ugandan shillings) is, of course, well above the
original 5% return first anticipated.
The financial viability of the fund in Uganda has
led to direct and indirect developmental returns. For
example, 80 enterprises have received some form of
BDA in addition to the more than 160 receiving
finance so far. And an independent audit of nine
sample enterprises revealed these alone have created
386 jobs. And interestingly, despite deliberately not
having a renewables-only criteria, a majority of
UEF deals involve renewable energy sources.
Real time adaptation of the model
While the UEF’s performance is pretty solid for a
pilot, operational experience revealed aspects that
could be improved to lower costs and risk. For
example, UEF mainly offered lease finance as it
was a product that ‘worked’ for both Ugandan
entrepreneurs and our banking partner.52 But we
found that on its own, lease finance did not
provide sufficient capital or flexibility to meet the
needs of SMEs.
Second, it soon became clear it was not cost
effective for the bank operating the fund to make
large numbers of small lease deals. But increasing
the deal size was not an option because SMEs were
the target market. So we experimented in using an
intermediary to carry out business development
and part of the credit assessment role. This was
feasible where we found SMEs operating in the same
sector – dried fruit, mushrooms and honey – since
all had similar finance and BDA requirements.
So in one case, a fair trade purchaser of dried fruits
– a company called Fruits of the Nile – took on
part of the bank’s role because it already had
commercial relationships with hundreds of the
farmers our SME fund wanted to reach. This
innovation significantly lowered unit costs and in
effect greatly increased the portfolio size less than a
year after launching the fund.
Third, though our local bank partner adapted well
to the aspects of our model, the bank’s asset-lending
culture and incentive structure combined to reduce
the potential value of the BDA component and
constrain the growth potential of the funds.
58 So far so good in Uganda Enterprise solutions to poverty - To learn more about this author, visit Shell Foundation's Website.
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While both SME energy funds are still young, the
pace of capitalisation in Uganda has been very
rapid, indicating interest in the market and an
encouraging depth of demand. UEF will be fully
committed before the end of 2005 – well before
the original close-out date.
For UEF, out of more than 160 deals closed, nonperforming
investments are running at 2% and no
write-offs have yet been made. The expected net
return on investment of 20% on a portfolio of
deals ranging from $10,000 to $400,000 (in
Ugandan shillings) is, of course, well above the
original 5% return first anticipated.
The financial viability of the fund in Uganda has
led to direct and indirect developmental returns. For
example, 80 enterprises have received some form of
BDA in addition to the more than 160 receiving
finance so far. And an independent audit of nine
sample enterprises revealed these alone have created
386 jobs. And interestingly, despite deliberately not
having a renewables-only criteria, a majority of
UEF deals involve renewable energy sources.
Real time adaptation of the model
While the UEF’s performance is pretty solid for a
pilot, operational experience revealed aspects that
could be improved to lower costs and risk. For
example, UEF mainly offered lease finance as it
was a product that ‘worked’ for both Ugandan
entrepreneurs and our banking partner.52 But we
found that on its own, lease finance did not
provide sufficient capital or flexibility to meet the
needs of SMEs.
Second, it soon became clear it was not cost
effective for the bank operating the fund to make
large numbers of small lease deals. But increasing
the deal size was not an option because SMEs were
the target market. So we experimented in using an
intermediary to carry out business development
and part of the credit assessment role. This was
feasible where we found SMEs operating in the same
sector – dried fruit, mushrooms and honey – since
all had similar finance and BDA requirements.
So in one case, a fair trade purchaser of dried fruits
– a company called Fruits of the Nile – took on
part of the bank’s role because it already had
commercial relationships with hundreds of the
farmers our SME fund wanted to reach. This
innovation significantly lowered unit costs and in
effect greatly increased the portfolio size less than a
year after launching the fund.
Third, though our local bank partner adapted well
to the aspects of our model, the bank’s asset-lending
culture and incentive structure combined to reduce
the potential value of the BDA component and
constrain the growth potential of the funds.
58 So far so good in Uganda Enterprise solutions to poverty - To learn more about this author, visit Shell Foundation's Website.
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Leanne Hoagland-SmithAre your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
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Linda RichardsonLinda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website |
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