Capital for the Underserved – by Melissa Lo

Capital for the underserved melissa lo

(Summary of The Kingdom Summit 2015 session by Melissa Lo)


A story

Namoli owns 10 acres of land but only two acres of it are productive. She grows corn on these two acres and every three months she manages to eke out $500. 80% of her land sits idle because she does not have the finance to get workers and material to work it.

Into such a scenario comes in a company called Ensibuuko. Its owners are David Opio and Gerald Otim. They are both from Uganda and grew up in farming families. They went to local universities, and about two years ago they went to London and won the Unilever Ashoka Young Change Makers award and the Sankalp Investor choice award.

Their desire is to solve the problem of inadequate financing that people like Namoli face. And they have come up with a brilliant solution called micro financing.

Let us quickly look at some of the challenges faced by people in availing micro financing.

System fragmentation

A lot of different players are trying to solve the same problem, but they are all not connected together. This is why it is difficult to get financing to the under-served. Let us look at some of them.

  1. Savings and co-operatives – They are member banks and are member funded. They are world farmers that come together in a farmer association.
  2. National banks – They are unable to reach about 80% of their customers because they are often located too far away.
  3. Government ministry - They are supposed to help the people but they don’t have the necessary technology or resources or management tools to be able to do so.
  4. Individual farmers – They are people like Namoli who are not making enough and can’t find affordable financing.
  5. Markets – These are basically imbalanced.

Players in the value chain

Let us look at the players in the value chain.

  1. Formal lending or the large banks

They find it difficult to reach customers because of some expensive factors like – difficult roads, small farmer base and the amount of money that can be made from the financing of the loan. Interest rates go up because it is risky to lend to the poor who are often unable to repay or whose track record is sketchy. So differentiating a good customer (to whom a lower rate could be given) from a bad customer (who is risky) then becomes difficult.

  1. Informal lending sector or the cooperatives

Cooperatives are member-governed where usually the farmers come together and pool their resources in order to put their savings together and make their loans available to each other. This helps them to do it at a more affordable rate. This is the informal banking sector and so may not be as sophisticated as the big banks. That means they use cash boxes to store money and don’t have computerized record keeping systems. They might be keeping books, papers and ledgers. As a result, they are susceptible to corruption and lack of transparency. It further makes it difficult for formal banks to work with them. The government also finds it difficult to work with them as they don’t have enough manpower to meet the needs of the population or they have to ride long distances to reach the farmers.

Financial inclusion through technology

It is for people like these farmers in the rural sector that David Opio began his company. His mother was one such person who spent long hours under the sun, farming, only to have middlemen get most of the profits that were due to her. Also since all her transactions were cash based, she didn’t have a credit history for herself. So Ensibuuko came up with a mobile solution that would connect all the players together. It was called Mobis. It is an app with a farmer-friendly design and that uses pictures instead of words. They deploy it through co-operatives who organize farmers that pay back loans.

This mobile solution did away with the paper trail and enabled people to get systematized through a data system. Now even the government could get involved with the informal banking co-operatives through their laptop without having to travel long hours to meet with the farmers. This also enables transparency between the informal banking co-operatives as well as the large banks.

So people like Namoli can now build a credit history when she takes her crops to the market and does cash transactions. Her credit history feeds into financial data and data managed assets. This enables national banks to know her by assessing her online profile. They can then decide about giving her a loan through the informal banking sector. The large informal bank is then able to lend to the players in the informal sector because now they have information, transparency and processes and they can identify the good and bad customers.

Namoli now is able to pay for the farming infrastructure required, for manpower and also give her kids an allowance. She can now save money, get and repay her loan through her mobile app. Ensibuuko enables her to also produce and purchase solar energy for her family through the Mobis app. She can be miles away from the nearest bank and living in a village, but this revolutionary application allows her to live a productive life.


1 Corinthians 1:26,27 says, ‘for you consider your calling brothers. Not many of you were wise according to worldly standards, not many were powerful, and not many were of noble birth. But God chose what is foolish in the world to shame the wise God chose the weak in the world to shame the strong’. As youngsters in Africa, let us take up God’s calling and be visionaries for Africa.


Capital for the underserved melissa lo


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