Matia Kasaija, the minister of Finance Planning and Economic Development, has urged Finca Uganda to graduate from a microfinance institution to a commercial bank and start giving out bigger loans to investors. This, he said, would spur the country’s economic development.
Kasaija, however, cautioned Finca that Ugandans have a poor culture of saving and don’t want to pay back loans.
“They keep on running away when they have loans and reappear when they have problems. The principle behind banking is trust. So, customers should always avoid running away from their creditors if they want development,” he said.
Kasaija also urged all financial service institutions to continue opening up branches in rural areas to attract more customers, especially women. He was speaking at the recent opening of Finca Uganda head offices along Acacia avenue in Kololo, Kampala.
In a separate interview, Julius Omoding, the managing director of Finca Uganda, said at the moment, they do not have plans of becoming a commercial bank due to the increasing innovation in technology of banking.
“With the advent of technology through point-of-sale technology, mobile banking and other initiatives, we are studying the market to see how commercial banking will affect our business model. This could be from a regulation perspective. So, let's see how the near future evolves,” he said.
He said since 1992 when Finca Uganda started, the country’s poverty level has dropped by more than half, from 56 per cent in 1992 to 24.5 per cent in 2010 partly because women in villages can now access loans for their income-generating activities.
Prof. Emmanuel Mutebile, the governor of Bank of Uganda, said financial institutions such as Finca play a critical role in Uganda’s economic sector by extending financial services to people.
“They mobilise deposits and extend loans to customers, which is not usually done by financial banks. They have developed very innovative technologies for lending customers, including small and micro businesses, which don’t have access to credit from commercial banks,” Mutebile said.
Finca was the first financial institution to transform into a microfinance deposit-taking institution in 2003. Its total assets grew from Shs 14bn in 2004 to Shs 117bn as per September 30, 2015.
Finca’s deposits have grown from Shs 2bn to Shs 60bn over the same period. The branch network has also grown from seven in 2004 to 28 today.