Counting Cowries

Unregulated SACCOs threaten the future of Microfinance in Uganda

Paschal — Fri, 21 Dec 2007 21:20:29 -0600

If you have not already done so, read The Observer article by Moses Talemwa on unregulated Savings and Credit Co-operative Organisations (SACCOs). The article highlights the story of a woman who has been defrauded by a microfinance institution in Uganda. The fraud was made possible primarily because SACCOs operate without any state oversight. This unusual situation occurred when the government created a post for the Minister of State for Micro-Finance, thereby taking regulatory responsibility for microfinance institutions away from the Central Bank. It was not the wisest decision in retrospect, and was probably made so that the government would be well positioned to take credit for the positive developments that microfinance can bring to Uganda's economy.

Now though the government has a potential catastrophe on hand. The lack of regulation for microfinance institutions threatens to undermine the confidence that many have in the practice and expose the NRM as bad managers. And for all his political guile, it is unlikely that Museveni would escape the fall out entirely. In his eagerness to woo local voters and impress the international community the President added a national microfinance scheme to his election manifesto called "Bonna Bagagawale". He also appointed his brother as Minister of State for Micro-Finance. It is therefore in Museveni's interest to see this mess cleaned up before it spills over onto the State House lawn.

But this goes beyond politics. The fraudulent SACCOs are likely to overshadow the well-managed institutions that are delivering services and making a difference. If that happens, social entreprenuers are likely to stay away from Uganda's microfinance institutions, making it harder for them to find the funding they need to deliver their services. That would be a real pity since microfinance does have the potential to lift many Ugandans out of the poverty.

Kiva is a beacon of hope. The nonprofit organisation that started its operations in a small Ugandan village has made headlines over the past two years by making it easy for would-be lenders to connect with poor entrepreneurs over the internet. Transparency is key to Kiva's model. For this reason, its field partners are well vetted, meaning that the people who lend on its network can continue to do so with confidence in the absence of well-structured government regulations for SACCOs.

Safaricom IPO is a for test Uganda's Securities Exchange

Paschal — Fri, 21 Dec 2007 03:51:27 -0600

Safaricom's decision to float its IPO on the Uganda Securities Exchange (USE) has sent ripples through the financial market in Kampala. Seen largely as a vote of confidence for the young exchange, the move may prove to be anything but.

The excitement is justifiable. Safaricom boasts a dominant market share in Kenya and has an innovative mobile-payment scheme known as M-PESA that is paving the way for mobile banking in East Africa. That innovation is paying off on the balance sheets. In March 2007, the mobile operator posted an impressive after-tax profit of $190 million, up 42.5 percent from the previous year.

But it is not all rosy for the company. Back in March questions arose concerning the ownership of Safaricom, specifically the involvement of a company called Mobitelea Ventures Limited. Although Safaricom is controlled by the Kenyan government through Telkom Kenya, Vodafone owns 35 percent and the remaining 5 percent belongs to Mobitelea. At issue here, is how Mobitelea acquired its stake in Safaricom. According to Vodafone, Mobitelea was an advisor on local business processes and protocol during Vodafone's negotiations with the Kenyan government. This though, is not a satisfactory explanation. Mobitelea is registered in Guernsey; any expertise the company may have on Kenyan protocols and businesses are highly suspect. What is more likely is that Mobitelea is a shell corporation whose true owners stand to benefit greatly from a Safaricom IPO. That IPO would have taken place in Nairobi but inquiries into Safaricom's ownership has slowed that process and forced the Kenyan government to look for alternatives to take the company public.

The sense of urgency is real. On November 16th France Telecom announced that it had won a bid to buy 51 percent of Telkom Kenya for $390 million. As part of that deal, the government of Kenya is required to sell 19 percent of its shares in Telekom Kenya within five years. The sell of shares in Safaricom will fulfill a part of that requirement, but not if a flotation is delayed by an investigation into Safaricom's ownership.

This is where Uganda's securities exchange comes in. By floating Safaricom on the USE, the Kenyan government would able to bypass the regulatory process in Kenya. It is a move that, if it happens, could taint the international reputation of the USE. But do not expect the young exchange to reject the offer. For all its success to date there are only nine companies listed on the exchange; it would benefit greatly by listing the East Africa's most successful company. Similarly, listed companies are not likely to complain. Stock prices rose with the news about Safaricom's IPO.

It is important to note the role that this announcement could play in the on-going efforts to integrate the East African states. There is already close cooperation between the exchanges in Dar-es-Salaam, Nairobi and Kampala, and there are plans to merge the three. If the Safaricom flotation goes down as a success, the USE will have a stronger case to be the center of a single East African bourse.

Biodiesel for a Boda-Boda economy

Paschal — Thu, 15 Nov 2007 14:19:55 -0600

If you are into engines and/or the environment, you might have heard about a guy called Jonathan Goodwin. By experimenting with diesel technology and alternative fuels, Goodwin has figured out a way to cut emissions and double the horse power of practically any SUV. For this little miracle, FastCompany magazine called him the Motorhead Messiah and put him on the cover of their latest issue.

Simple and efficient

Goodwin's designs build on existing technologies, particularly diesel.

Diesel technology is crucial to all of Goodwin's innovations because it offers several advantages over traditional gasoline engines. Pound for pound, diesel offers more power and torque; it's also inherently more efficient, offering up to 40% better mileage and 20% lower emissions in engines of comparable size. What's more, many diesel engines can easily accept a wide range of biodiesel--from the high-quality stuff produced at refineries to the melted chicken grease siphoned off from the local KFC.
CLIVE THOMPSON, in FastCompany magazine, 2007

If that sounds impressive, it is even more so when hydrogen is added to the mix.

The hydrogen, ignited by the diesel combustion, burns extremely clean, producing only water as a by-product. It also displaces up to 50% of the diesel needed to fuel the car, effectively doubling the diesel's mileage and cutting emissions by at least half. Better yet, the water produced from the hydrogen combustion cools down the engine, so the diesel combustion generates fewer particulates--and thus fewer nitrogen-oxide emissions.
CLIVE THOMPSON, in FastCompany magazine, 2007

Goodwin's work is being cited as an example of how innovative thinking can help Americans reduce greenhouse gases without sacrificing their love for oversized vehicles.

That got me thinking about possible applications for this technology in Uganda:

Biodiesel for your generator

Uganda is in the midst of a crippling energy crisis. Hospitals, schools, businesses and households alike have been forced to buy generators that are expensive to run. The Bujagali hydropower dam is about four years away from completion, if it stays on track, and the cost of fuel is not going down.

If Goodwin's innovations can extend beyond the automotive industry, that would be good news. This is not out of the realm of possibility since, according to the FastCompany article, Goodwin's experiments with biodiesel were inspired by the work of Uli Kruger, a German who has spent decades in Australia exploring techniques for blending fuels that normally don't mix.
The fact that scientists in Uganda are already working on ways to generate hydrogen from garbage is an encouraging sign.

Biodiesel for your boda-boda

If you have been to Uganda in the last 5 years then you should be familiar with boda-bodas. There are over 10, 000 of these modified motorcycles by recent estimates. That is a sizable market by any standard. If the boda-boda engines were converted to run on biodiesel, the grease from any takeaway in Kampala would be able to power the engine with enough torque to carry two over any porthole in the city. Sounds like a pipe dream? Read the article.

The takeaways would have some extra income from selling their garbage to biofuel converters; the boda-boda drivers would have a cheaper, cleaner source of fuel.

A question of curiosity, not formal education

I always find it incredibly humbling to read about or meet people who, with little or no education, create something that has global impact. It is a reminder that old-fashioned curiosity trumps any academic credential when it comes to innovative thinking. Goodwin, is one of those curious fellows:

After dropping out of school in the seventh grade, he made a living by buying up totaled cars and making them as good as new. "That," he says, "was my school."
CLIVE THOMPSON, in FastCompany magazine, 2007

Do we have a Goodwin in Kampala?