From an Ndimugezi Cashbox to Canary Wharf and Back

By Gwyther, Matthew | Management Today, January 1, 2011 | Go to article overview
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From an Ndimugezi Cashbox to Canary Wharf and Back

Gwyther, Matthew, Management Today

It's banking, Africa-style: Ugandan loan societies that pay interest to investors, or a mobile phone scheme making 670 million payments in Kenya. Barclays plans to draw on such energy and spin a thread from the City to an pounds 80 loan for fresh veg, reports Matthew Gwyther.

Where better to consider what comprises 'socially useful' banking than at the small village of Ndimugezi, an hour's drive east from the Ugandan capital, Kampala? The 30 members of the Village Savings and Loans Association (VSLA) - 16 women and 14 men - are conducting a regular meeting, with the padlocked cashbox placed prominently on a table in the middle of the compound.

VSLA chairman Patrick Isabirye calls the meeting to order with a prayer The members agree to put aside 15,000 Ugandan shillings (pounds 4.10) for the welfare fund. Then it's down to business. In August, Abdul Bamingba took out a USh300,000 loan (around pounds 80) - a large sum in a country where many earn USdollars 1 a day - to buy vegetables to sell and to support his wife and eight children. Bamingba has been repaying it little by little, at 10% per month, and has found it a bit of a stretch. However, this is not an unusual rate in such associations, which charge anything between 5% and 20% per month, according to what they view as the risk. Association members share any interest earned, according to their stake in the total pot.

Joy Tumwesigye, more confident and articulate than Bamingba, tells how the VSLA has helped her improve her lot. Several years back, she borrowed 800,000 'bob' (pounds 220) for a cow. She also borrowed to send two of her children to university and opened two 'simple hotels'. She has earned more interest than anyone. A round of applause for a true entrepreneur, maybe even a banker, in the making.

Unusually, this meeting is being attended by a professional banker - Antony Jenkins, chief executive of Barclays Global Retail and, with 14 million customers, one of the most powerful in Africa. Barclays has been in Africa since the late 19th century and is well established in 11 countries. Jenkins is on a whistle-stop tour. The bank has a good history of CSR, working with bodies such as Unicef.

Barclays was a partner in the groundbreaking pounds 2.5m Ugandan Katine project, run by The Guardian, Farm-Africa and the African Medical and Research Foundation.

Most recently, Barclays has launched its Banking on Change project, a three-year, pounds 10m commitment to use savings-led microfinance to help half a million poor and unbanked Africans. In Uganda, Barclays wants to recruit 35,000 people and persuade them to deposit the VSLA cash into a special feeless but interest-earning account - the first rung on the ladder of formal financial services. This has advantages: not least, safety. The cashbox is vulnerable in a country where security is a real problem. The Barclays down the road in Iganga is protected by a guard with a pump-action shotgun.

MT has been invited by Barclays to Uganda as the debate in the west about banks, their bonuses, 'social use' and structures is as heated as ever. (Back in Kampala, I had watched George Osborne announcing his cuts live from Westminster.) It's a long way from the tin box on the table in Ndimugezi to Canary Wharf - and to Bob Diamond, who becomes CEO of Barclays at the end of March, a Master of the Universe who took home pounds 22m in 2007. But in our globalised world, the link is there - a thread that leads from the highest echelons of investment banking, with its quants, derivatives and CDOs, right down to pounds 80 loans for fresh veg. It's a vital link for the long-term welfare and development of Ugandans.

The phrase 'socially useless activity' was coined by Lord Turner, chairman of the Financial Services Authority, to describe a host of investment bank trading activity. Barclays protests strongly that it does much of social worth and - with its universal status as retail and investment bank under threat - it needs to prove its point.

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