Where We Work : Uganda : Microfinance

Microfinance is the heart of BRAC’s approach to alleviating poverty and helping poor Ugandan women realise their potential. More than 125,000 women are members of almost 6,000 community-based microfinance groups throughout Uganda. They gather weekly in villages, towns and city neighbourhoods to make repayments on their loans and apply for new ones.

Programme Description

BRAC’s microfinance programme has been designed to serve large numbers of poor people with reliable access to cost-effective financial services.

Programme Components

Women’s Groups: Community partnerships and institution building are essential for poor people if they are to change their economic, social and political conditions. We deliver our microfinance and other programmes through organising groups of poor women who come together to improve their socioeconomic position.

BRAC microfinance branch offices conduct area surveys and consult with community leaders and local elders in selecting the 20-30 members of each group. The group is then sub-divided into smaller groups of five, each with their own elected leader. The members of the small groups take co-responsibility to solve peer repayment problems.

New borrower groups meet four times before any loan disbursement takes place. After that, they meet weekly to discuss credit decisions with their dedicated BRAC Credit Officer and make their loan repayments. BRAC provides training and technical assistance to its members and others in the community, empowering them to earn more income from existing activities and start new ones.

Microfinance institutions in Uganda are not allowed to accept savings, a crucial missing element in building sustainability. So we have launched a programme to recruit Savings Promoters among our microfinance members who are encouraging and helping other members to open accounts in commercial banks. This pilot programme is under way in five urban branches in Kampala East and five rural branches in Iganga. From the lessons learnt we plan to expand it on a national level.

Microloans

At the core of the programme are microloans, which are exclusively for the women participating in the group process. Borrowers range in age from 20-50 with little or no education. BRAC lends to women who are not served by other microfinance institutions.

Borrowers typically operate businesses that provide products or services to their local communities. Women with seasonal businesses, such as farming related activities, may also be eligible for shorter term loans.

Key Features of a Microloan

• Loan repayments in small weekly instalments
• No physical collateral needed
• Loan range: USD 100-800
• Competitive interest rates
• Death benefit provided
• Services delivered to member’s village
• Available in rural and urban areas

Most popular loan uses

• Grocery
• Bar and restaurant
• Clothes and garments
• Hardware
• Retail shop
• Hair salon
• Cosmetic shop
• Wood products
• Motor spare parts
• Leather products

Small Enterprise Loans

BRAC offers small enterprise loans to entrepreneurs seeking to expand small businesses. The loans enable owners to create new employment opportunities and provide new services. Typically loans are given for trading, agriculture, poultry and livestock, fruit production and other types of small enterprises. These small entrepreneurs would otherwise have limited access to the formal financial system - too large for microloans but with not enough collateral for commercial banks. The small enterprise loan is offered to an individual rather than to a group, and is available for both male and female entrepreneurs.

Some members of the microloan scheme become eligible for this scheme as their businesses expand and their investment needs grow.

Key Features of a Small Enterprise Loan

• Available to both male and female entrepreneurs
• Loan range: USD 750-5,000
• Competitively low interest rates
• Repayment mode: equal monthly instalments