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By Mathias Katamba Chief Executive Officer Uganda Finance Trust Ltd (MDI)

CONTRIBUTION OF REGULATION AND SUPERVISION TO GROWTH OF MICROFINANCE IN UGANDA AT THE 5TH AFRACA MICROFINANCE FORUM 2nd -4th JULY 2008 COTONOU, BENIN. By Mathias Katamba Chief Executive Officer Uganda Finance Trust Ltd (MDI). Gained independence in 1962 Various administrations

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By Mathias Katamba Chief Executive Officer Uganda Finance Trust Ltd (MDI)

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  1. CONTRIBUTION OF REGULATION AND SUPERVISION TO GROWTH OF MICROFINANCE IN UGANDAATTHE 5TH AFRACA MICROFINANCE FORUM 2nd -4th JULY 2008COTONOU, BENIN By Mathias Katamba Chief Executive Officer Uganda Finance Trust Ltd (MDI)

  2. Gained independence in 1962 Various administrations - 1962 – 1971 Milton Obote 1971 – 1979 Idi Amin 1980 – 1985 Milton Obote Stable since 1986 under President Yoweri Museveni Uganda Context

  3. Population: 30.2 million (estimate) GDP: $300 per capita Fertile soils, abundant rainfall Largely agricultural/rural Ranks 154 out of 177 on the UN Human Development Index Rebel activity in Northern Uganda is subsiding. Uganda Context

  4. Uganda Finance Trust Ltd (MDI) • Finance Trust is one of the oldest Microfinance Institutions in Uganda. First registered – UWFCT in 1984. • Incorporated as a share based company in March 2004 • A key player in Uganda’s formal financial sector. • A regulated Microfinance Deposit-taking Institution since 12th October 2005. • Member of Credit Reference Bureau (CRB) • One of the largest MFI branch networks in Uganda with all 23 branches interconnected. • Client base : 85,000 savers and 17,000 borrowers. • Offers a variety of savings and loans solutions and money transfer services through Money Gram International.

  5. Vision & Mission Vision • Low-income people having access to financial services. Mission • To provide unique financial services to low Income people in Uganda, especially women, in a manner that delights our customers and adds value to our stakeholders.

  6. Background to regulation of Microfinance in Uganda • Failure of formal banks to provide financial services to low income people. • Economic break down in the 1970s & 1980s in Uganda • Social agenda of poverty alleviation by NGOs in the 1980s & 1990s • Need for financial services by low income people • Microfinance institutions bridge the gap

  7. Background to regulation of Microfinance in Uganda • Sustainability and profitability • Growth of microfinance outreach • Microfinance forum( MFF)-Interest in microfinance by donors, development partners, Government & the central Bank of Uganda • Mainstreaming of microfinance into formal financial sector • Regulation –MDI law 2004

  8. Rationale for regulation • Enhance orderly growth and overall stability of the financial sector • Build public confidence in the microfinance institutions • Safety of public deposits -Provide a framework, law and regulations for the supervision of MFIs that desire to intermediate micro-deposits • Increased savings mobilisation • Safeguarding the public against unfair lending by MFIs • Increased outreach to rural areas • Define the scope of BoU’s microfinance regulation/ supervision.

  9. Regulation & growth of microfinance

  10. Benefits of Regulation to MDIs • Infrastructural improvements: • Management information systems • Image & premises improvements • Improvement in Management, ownership & governance. • Prudence & accuracy in reporting • Insurance of deposits and cash • Responsiveness to client needs • Competition with commercial banks • Diversified product range • Broadened customer target group • Increased awareness through marketing drives

  11. Finance trust experience • Formation of a new company • Change in Management, governance & ownership structure • Infrastructural improvements-MIS, Premises • Preparing staff • Marketing • Product development • Opening new branches • Re-branding

  12. Post regulation challenges • Focus more on the not so poor • Rigorous reporting requirements • Staffing -cultural change i.e from NGO to banking practices • Staff turnover • Differentiation-Public can’t still tell the difference between MDIs and other MFIs • Competition • Increase in costs

  13. Recommendations • People: • Staff training & recruitment • Cultural change • Change management • Governance & Ownership issues • Management –competencies & moral suitability • Exposure visits • Processes: • Manuals • Policies & procedures • Back office operations • Segregation of duties • MIS

  14. Recommendations cont’d • Results • Productivity & Efficiency • Target setting • Cost/income • Innovate now • Product development & innovation • Branch opening now • Customers: • Customer service strategy • Marketing • Branding

  15. Finance trust before

  16. Finance Trust before

  17. Old branch premises

  18. Old Head Office

  19. Current branch premises

  20. New branch premises

  21. Finance Trust today

  22. Inside the new banking hall

  23. Inside of the new banking hall

  24. New branch opening

  25. THANK YOU

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