In Uganda, over 20 million people live on less than USD 2.00 per day (World Bank). Many live in rural areas with little or no access to formal financial services, and only 20% of adults are served by formal banks (FinScope, 2013). Microfinance institutions (MFIs, which in awamo’s definition include Savings and Credit Co-operatives) could offer vital financial services to the remaining 80%. However, due to high default rates and transaction costs MFIs charge annual interest rates of over 60%. Micro, small and medium-sized enterprises (MSMEs) cannot afford that. As a result local economies and job creation stagnate.

In other sub-Saharan African (SSA) countries the numbers are similar. 75% of the adult population in SSA have no access to finance. According to the World Bank, already today this equals more than 400,000,000 people who are excluded from the financial sector. As in Uganda, the main problems are the inefficient, paper-based processes which lead to non-transparency and high transaction costs. Therefore it is impossible to share credit information within the sector. Even the regulated banking-sector is lagging behind when it comes to coverage of population by credit bureaus. The International Finance Corporation reports only 5.8% of the adult population in SSA is covered by public and private credit bureaus. In addition no unambiguous identification of clients is possible due to people not having IDs or using counterfeit IDs.

Overall, the present situation results in limited access to finance for the bottom-of-pyramid population, in particular poor individuals, smallholder farmers, and MSMEs.

Read more about how awamo will change this situation…