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SME banking – Unlocking the growth potential of an underserved segment

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Lillian Lwantale, senior manager Advisory, Strategy and Operations Deloitte Uganda Limited

Lillian Lwantale, senior manager Advisory, Strategy and Operations Deloitte Uganda Limited

Small and Medium-sized Enterprises (SMEs) are an important segment in Uganda’s economy. According to the Ministry of Trade, Industry and Cooperatives, the SME sector employs over 2.5 million people (90% of the entire private sector) and generates 80% of manufactured output which contributes 20% of the gross domestic product (GDP).

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Even though SMEs play a significant role in the economy, most have limited access to financing. “Less than 40% of SMEs in Uganda have access to bank loans and approximately 80% of the SMEs are unserved or underserved by financial institutions. SMEs are typically deemed riskier than large corporations due to lack of credit history, poor financial backing and governance structures, less business experience, and low business diversification,” explained Lilian Lwantale, senior manager Advisory, Strategy and Operations Deloitte Uganda Limited.

Today, these needs are inadequately addressed by Uganda’s financial ecosystem. Although the SME loan size is growing, the amount of loans SMEs receive is still disproportionately less than corporates despite their more significant contribution to gross domestic product (GDP) and employment. The current state of SME financing
remains both a sizeable gap to fill and opportunity to serve. SME loan volumes in Uganda constitute less than 20% of total loans, presenting a sizeable opportunity for banks to target and increase lending to the SME market.

Lack of financing is consistently cited by SMEs as one of the main barriers to growth. However, several key factors impede SME lending. “Financial infrastructure such as low SME coverage by credit reference bureaus increases the cost of SME credit risk assessment, inadequate distribution channels limit banks from reaching out and serving SMEs in either the physical or digital space- not to mention lack of cash flow visibility which forces banks to adopt stringent collateral-based credit risk models hindering lending,” she emphasized.

These impediments are not unique to Uganda but also prevalent in more advanced economies where SMEs have easier access to loans. In those countries, we see banks, financial technologies (FinTechs) and e-commerce providers seeking to fill the SME financing gap by adopting innovative business solutions. So what opportunities are ripe for Uganda’s case study?

“Research shows that there is a disparity between what SMEs want and expect from banks and what banks can deliver. They require access to unsecured credit and are willing to pay a higher interest rate to obtain it through reliable, convenient channels such as branches, ATMs, and internet banking. At Deloitte, on top of providing SMEs with financial oversight, we offer business advice on how to lower their business costs, improve productivity and be better prepared for the global market,” Lwantale added.

Lwantale further mentioned that in the advent of the digital age, financial institutions in Uganda have to rethink the role of banks in the SME banking space to address the financing gap and capitalize on the SME banking opportunity.
“Given the importance of SMEs to Uganda’s economy, a strong well financed SME base is key to local and regional economic growth. With sufficient financing and access to business advisory services to foster continual improvement of operational efficiency and productivity, SMEs can become more competitive and resilient, drive innovation and be sustainable in today’s competitive economic landscape.”

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Museveni meets President of StarTimes Group during FOCAC Summit

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 Ugandan President Yoweri Museveni met with the President of StarTimes Group Pang Xinxing on Wednesday when he was attending the Summit of the Forum on China-Africa Cooperation in Beijing. Mr Pang Xinxing introduced that StarTimes created more than 6000 job opportunities since it started investment in Uganda in 2009 and StarTimes digital TV transmission platforms have enabled Ugandan people to watch rich international and local television programs with an affordable price. Pang said: “We look forward to expanding further bilateral cooperation with our advantageous technology and media resources.” President Museveni appreciated StarTimes’ contribution in Uganda’s digital migration progress and the project of “Access to Satellite TV for 10,000 African Villages”.
He said that the national digital migration is a very important fundamental project for Ugandan people and it wouldn’t be achieved without StarTimes’ involvement. Museveni also invited Pang to visit Uganda with hoping that StarTimes can have more investment in the country.

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StarTimes now is the biggest digital TV operator in Uganda with holding 75% market because of affordabl prices and rich content services. In August, StarTimes just unveiled the biggest ever single sponsorship in the history of Uganda www.startimestv.com sport after remarkably securing the Uganda Premier League and FUFA Big League “Title and Broadcasting Rights” from FUFA for a staggering US$ 7,240,000 for 10 years starting with the
2018/2019 season. The Vice President of StarTimes Uganda company, Mr Aldrine Nsubuga said: “We however don’t just want to entertain football fans with foreign football, we want to be relevant to local football fans. We want them to appreciate their local football and support it with a greater passion which is why we want to bring the local league in every household through our broadcast platforms.” The project of “Access to Satellite TV for 10,000 African Villages” is a China-Africa Cooperation program, which was announced by Chinese President Xi Jinping on December 4th, 2015 when he was present at the Johannesburg Summit of the Forum on China-Africa Cooperation. The project is aimed at enabling African families in rural areas to have access to the digital signal with high-quality images and rich TV programs. There will be around 10,000 villages in more than 20 African countries benefiting from the project of “Access to Satellite TV for 10,000 African Villages”. For Uganda, 500 villages are
included in this China-Africa cooperation project. As Africa’s leading digital TV operator, StarTimes is undertaking the whole project. On 20th July, StarTimes launched the project of “Access to Satellite TV for 10,000 African Villages” in Uganda.

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Emirates offers Ugandan travelers attractive offers to Dubai

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Emirates

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Emirates is offering Ugandan travelers the opportunity to visit Dubai, available at a very special offer for Economy and Business Class roundtrip, a free third piece of luggage of up to 23 kg and a month’s tourist visa included in the offer.

Under the special offer, an Economy Class ticket from Entebbe to Dubai costs $359 and Business Class $1,309. The special offer is for a limited time only and tickets must be booked between 13th September 2018 and 27th September 2018, while travel must take place between 13th September 2018 and 31st March 2019. The cost of the ticket includes airport taxes.

Emirates is also offering a 3rd piece of luggage of up to 23kg for Economy Class and up to 32kg for Business Class, with a one-month tourist visa included.

Dubai provides a great escape for visitors. Its year-round sunshine, world-class shopping and restaurants, stunning beaches and iconic buildings offers something for the whole family. Visitors to Dubai can enjoy some of the city’s must-see places like Global Village – multi-cultural festival park and shopping destination – as well as theme parks such as Wild Wadi Waterpark and IMG World of Adventures. The city also offers a wide range of accommodation to suit all budgets.

On all Emirates’ flights, customers can look forward to hours of entertainment on the award-winning inflight entertainment system, ice, which offers over 3,000 channels of on demand audio and visual entertainment, from the latest movies, music, audio books and games, as well as family friendly products and services for children, including complimentary toys, kids’ meals and movies, priority boarding for families and the use of free strollers at Dubai International Airport.

In addition to the on-board comforts and products, customers will experience the world famous hospitality from Emirates’ multinational cabin crew who come from 135 nationalities and speak over 60 languages, while enjoying chef prepared regional and international cuisine, using the freshest ingredients, accompanied by a wide range of complimentary wines and beverages.

Emirates flies daily from Entebbe to Dubai.

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MTN floors Threeways Shipping Group to recover USD 4 million

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By Our Reporter

Threeways Shipping Services Group Ltd’s persistent applications to courts in a fervent effort to block the hearing of a suit filed by MTN against it and its Directors for recovery of USD 3,761,933 has hit a dead end in a fresh ruling by the High Court Judge, Justice Billy Kainamura of the commercial division who dismissed it with costs.

In his ruling on September 12th 2018, Justice Kainamura agreed with the position fronted by MTN Lawyers that the case involves enormous sums of money and justice would be furthered if the suit is heard on its merits. He further held that Threeways had not set out any legal grounds disputing the hearing of the case and the hearing of the suit had been frustrated by Threeways incessant applications.

The fresh ruling stems from a suit MTN filed against Threeways for defrauding the telecom giant of USD 4million in fictitious claims. Threeways allegedly made the fictitious claims to MTN between March 2009 and April 2012 on over 130 invoices with collusion of two former MTN employees: John Paul Basabosa and Naphtali Were and were paid colossal sums of money. The two employees were jointly sued with Threeways.

However, in 2014 the Commercial court presided over by Justice Christopher Madrama ruled that it was wrong for MTN to pursue the case against Threeways shipping Services yet there was a memorandum signed not to pursue a criminal case against the company at the anti corruption court.

Since then there has been back and forth appeals with MTN seeking to reinstate the suit and Threeways seeking to block it, resulting into the Wednesday ruling in which Justice Kainamura asserted thus: “I am inclined to agree with Counsel for the respondent, this case involves enormous sums of money and justice would be furthered if the suit is heard on its merits. On this premise, I dismiss this application with costs.”

MTN Lawyer Bruce Musinguzi said the next course of action is to set down the main suit for hearing at the earliest possible date to enable a speedy conclusion of the case.

A top official at MTN who preferred anonymity because the matter is still before court expressed happiness with the ruling. “It was just a matter of time before the truth comes out,” he said, adding, “You cant defraud a reputable company in broad day light, with all the glaring evidence and continue walking around with impunity. We are happy that court will finally dispense justice in a fair hearing.”

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