In October 2019, we made a convertible debt investment into the Ugandan company Numida, offering (mobile based) financial literacy education and loans to entrepreneurs.
In Uganda, there are about 450,000 ‘micro/small and medium-sized enterprises’ (MSMEs). Collectively they generate about 90% of the private sector production and constitutes the key engine of job creation – accounting for 80% of the economy’s jobs. When these businesses thrive, the local economy flourishes and the standard of living improves.
However, 3 out of 4 of these enterprises identify access to capital as their greatest growth constraint. Banks struggle to serve the MSME segment for a number of reasons, including weak credit information, lack of collateral, and low levels of financial literacy. The lack of access to credit hampers the businesses’ ability to increase inventory, manage working capital, and consequently grow.
To maximize the positive impact of access to capital, training around the financial management of a business, coupled with responsible lending practices, is critical. The Ugandan company Numida offers a smartphone app to MSMEs, supporting them in two ways. Firstly, the app offers a financial management tool, where the entrepreneurs are trained on tracking costs, revenues and associated profits, etc. Secondly, based on this data, the tool assesses credit worthiness and helps the MSME access unsecured business loans ranging from $50 – $2,000. The entrepreneurs’ success in repaying the loan unlocks access to larger, more long-term loans at lower interest rates.
So far Numida has supported 1115 businesses, disbursed 3160 loans, totalling $500,000, with a 92% recovery rate (i.e. % of loan payed back). Numida’s clients have, within 6 months of becoming a client, witnessed significant monthly revenue increases (anecdotal data showing median revenue increase of 115%), allowing many businesses to double the number of employees.