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Card Pesa
Card Pesa
A system that keeps The Rich Rich can only be changed if more ordinary people are provided access to credit.

We have noticed articles in the newspapers that say the Central Bank is not happy that Commerial Banks have not reduced their lending rates even with the lowering of the CBR. (Central Bank Rate)

We wont claim to be Economics Czars but from our laymens view the problem of interest rates is not around what the CBR is but rotates around the fact the fewer and fewer individuals have the basic requirements that banks will ask for to provide one with a loan.

This means that because of the rules, only a small portion of the populace can take bank credit and so for the banks to break even they have to keep their interest rates high.

Basically in Uganda to get a loan from a commercial bank you will have to have either collateral or hold a contract/lpo that gives the bank comfort that they will be able to recover their money come- what-may.

Now even if you have the highest value collateral, a bank will not give you a loan if they cant calculate with a high level of certainty that from the economic activity you do, you will earn enough gross profit to cover the monthly repayments of their loans.

This essentially means that only people who have already been in business for a while and amassed a level of collateral that outstripes the value of the financing they need can get more financing.

So if you are Rich now, and you have already been earning revenue, then you are the perfect person to walk into a commercial bank and pick up more money to do more business.

That is why a certain class of people who have held real estate and have enterprises which span generations keep getting rich in this country whilst the rest no matter how brainy or innovative will never have businesses that take flight.

That also means that the older you are, the more likely you will have access to financing, yet when older, you are more risk averse and do not have as much energy and cutting edge knowledge to bring new ideas to the market, test them fail and try again.

We therefore need to come out with ideas that change this system for many old wealthy men and women are dying with wealth which would have been better utilised or grown if it could find its way to the young capable hands of well educated and exposed youth to multiply it.

So our philosophy at Card Pesa is to strive to identify young budding entepreneurs and enterprises that we can fund through selection after funding as many individuals and businesses as we can so that we can find the diamonds in the rough.

To increase (democratise) credit we will start by cutting out the need to have collateral which makes the enterpreneurs work twice as hard to get credit by first amassing collateral then demonstrating cashflow and we make them focus on generating cashflow to meet the needs of the business as our focus.

When we have a critical mass the volume in our portfolio will then be the collateral that any financier will require to provide cheaper rates which we can then use to lower the rates we charge our clients and in so doing make it possible for people who were not born Rich to have a fighting chance of getting Rich.
Card Pesa
Card Pesa
Its about CHARACTER. and SMALL MONEY HAS ALOT OF POWER

After running the platform for 264 days and analysing the data about client performance we have come down to the notion that the most important aspect about determining credit limits/levels is to determine the Character of a borrower.

On our platform the indicators of what the character of a client is can be seen by who the client uses as a guarantor, next of kin and workmate as if any of those are on the platform their performance would reflect on the new client. Our belief that "birds of a feather flock together" still remains ever so true.

Other indicators about a clients Character is demonstrated by the ability to respond and communicate with us when there are changes in their ability to meet obligations. We have found that those who communicate when they will not be able to meet their payments on dates specified are clients with better character which we reflect with better terms.

Please note that though we say we provide working capital loans we are not saying we will fully capitalise a business. Our loans are not designed to buy stock for a big business as that would require a more detailed understanding of the cashflows of the business, clientele, business environment etc for which our current system is not designed to cater for.

So in simple terms the type of working capital we refer to is the small amounts that would cripple you as a worker or a business that come in handy at a point when you would suffer bigger loses if you couldnt raise.

One of our clients gave an example of running a construction company in which they do projects in hard to reach remote areas and from time to time they find challenges buying food for their contactors from the villages they operate in as well as provide small transport refunds or buy small tools or implements to complete small tasks. These relatively small amounts of money could be expensive in terms of time and effort to get and may be urgent and those are the kind of working capital requirements we would like to meet and help client sort out.

So when a client who understands the service says that whilst everyone is looking for the highest amount of credit they can get it is important to also understand that "Small Money Has a Lot of Power" and that is the space we would like to operate within.
Card Pesa
Card Pesa
Growth through Collaborations and Stakeholder Engagement

We would like to announce that we have joined Fitspa Uganda.

FITSPA (Financial Technical Services Providers Association) is an independent, nonprofit, membership-based association representing Uganda’s local and global fintech community.

Their mission is to create a conducive environment to stimulate innovation in the financial services sector.

We believe this mission aligns with our goals and is in line with the type of services we are offering and would like to offer, so we look foward to participating actively in the associations activities.

We have also engaged the services of A N Associates to provide us with Audit and Advisory Services.

The team at A N Associates comprises of members who have vast knowledge and experience in development banking especially in the local context and we feel they will be able to guide and advise us appropriately with regards to how we meet local and international regulatory requirements and put in place structures that put us in good stead in our quest to create a digital bank for the ordinary man.

Lastly we have also agreed to participate in Dgroups of UNCDF. (United Nations Capital Development Fund)

Dgroups is UNCDF Uganda's new community of practice for the digital economies ecosystem.

This community of practice (COP) includes, MNOs, financial service providers, fintechs, regulators and other players active in the digital economy space.

In this dgroup, we will find updates about Uncdf activities in Uganda and discussions on how to build inclusive digital economies.

Our belief is that openness and transparency about the collaborations with the different entities and organisations we associate with will be key in helping us engage key stakeholders in the sector and will provide us with timely and useful contacts and information which we can act upon to improve the ecosystem in which we operate as well as contribute meaningfully towards the development of our sector.
Card Pesa
Card Pesa
Now Licensed as a Non Deposit Taking Micro Finance Institution.
Card Pesa
Card Pesa
Carpe diem, quam minimum credula postero,

Translated means

"Seize the day, put very little trust in tomorrow (the future)".

Day 243 of Card Pesa.

Platform is still up and running and we will be making some major upgrades in the next few weeks.

We now have clients in all regions of the country with a gender mix of about 33% famale and 67% male.

We have noted that from our records females are less likely to take credit than males for even those who sign up and are allocated with credit limits are in general less likely to use the the credit outside of emergencies and are in most cases more likely to pay back in line with the terms and conditions agreed.

We have also began to prove our hypothesis that states that "Birds of a feather flock together" in our analysis of our delinquent portfolio it is clear that all our most delinquent clients are known to each other and signed up around the same time using the same process.

As mentioned in earlier posts we have handed them over to our debt managers to effect recovery as that is not our emphasis and acts as a distraction to what our focus should be which is growing our good clients.

This year we will focus mostly on working on internal systems and processes that will be geared towards scaling our operations and providing a world class service.

We intend to improve our apps and ussd platforms, upgrade our registration from regulated money lender to a Tier 4 Non Deposit Taking Micro Finance Institution and to look for investment partners that we can add to the ones we already have to enable us to handle the growth in client base.

We will also be launching a new class of premium card known as The Unicorn which will provide higher credit limits and complementary services like health and life insurance and we are currently working with partners on how we will roll this product out so we can further segment our offering based on demonstrable client needs.

Unicorn holders will also be able to use their cards to make online purchases with a twist in how buyers authenticate their purchase which we envisage will be a game changer in the way online payments are made for it will allow lay people to also engage in online commerce. So watch out for that development to be piloted during this year.

When the app is updated we will also start signing up merchants who will accept The Phoenix and The Unicorn for clients who want to recieve credit through hire purchase or just normal credit on purchase on an item when cashflows do not permit.

We envisage a situation when payments made through Card Pesa for such kind of purchases will be the laymans standard as we would be the guarantor or the actual provider of credit to our customers who would like to access it.

In summary what we are learning is that generally most clients are honest and meet their repayments in time.

There is still a huge market for the kind of credit we offer and we on a daily basis receive all sorts of engagements from partners who would like to work with us in their different fields especially as regards the financially excluded populace such as refugees, farmers and small scale businesses that do not meet the kyc criteria that a larger financial institution would require.

So Carpe Diem,

Everyday the platform remains operational we dispell the myth that for a layperson to access credit they need to provide collateral.

p.s

75% of Uganda's population is below 35 and the common thread amongst all that populace is that they do not have collateral yet they are at their most energetic and productive part of their lives so someone has to believe in them and finance them.
Card Pesa
Card Pesa
Today we are proud to have signed an agreement with Global Debt Management Services GDMS http://globaldebtmanagement.co.ug/ to help manage all clients whose debt the system deems to be delinquent.

We believe that the the goals and vision of GDMS align with ours in so far as they will ensure that we as Card Pesa focus on growing good customers who we can support and develop and leave the management of our delinquent portfolio to specialists in that field.

Our agreement with GDMS will also cover the management and coordination of their recovery efforts with our clients and actions of updating the credit reference bureau setup by our regulator to help safeguard other lenders from falling victim to the same non creditworthy individuals.

It is key to reiterate that our focus should never be on recovery of delinquent facilities as those do not help grow the industry, however as an organisation, it is incumbent upon us to safeguard stakeholders funds as much as is possible and also help in ensuring that costs of credit goes down because the risk profile of good borrowers is low and those who are proven high credit risk are quickly and easily identified and removed from the system.
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