SYPO Uganda Ltd. is a Ugandan subsidiary company of the Dutch NGO SYPO. With this company, we extend small business loans to thousands of women in Central Uganda. The repayment percentage is over 99%, and the project is expanding rapidly.
One of the largest problems of extreme poverty is the inability to save. Most people in rural areas of Central Uganda barely produce enough to consume, without a surplus to invest in growth. In case of shocks like a lost harvest or death in the family, a complete lack of safety nets makes families extremely vulnerable. Small loans can create a surplus to invest in continuous growth, and a buffer to make families more resilient.
SYPO started the company SYPO Uganda Ltd. to reach poor women in rural areas of the Mukono and Buikwe districts. We have developed an innovative business model to ensure that we reach even the most remote areas with low-cost loan products, and with complete transparancy to the clients. It is a lean business model with high levels of autonomy for the 'Loan Officers', the employees that actually give out and collect the loans, minimal management, and an emphasis on technology to enable diligent monitoring and communication. We have been able to work with ~50% of the costs of our peers in Uganda, targeting more difficult, remote clients. To read more about how we achieve this and how we plan to grow, please read our Business Plan, drafted with the assistance of PricewaterhouseCoopers, and our Business Model and Strategy:
SYPO Uganda Ltd. Business Plan 2012-2015
SYPO Uganda Ltd. Business Model and Strategy
On our website wwww.microbanker.com, you can select which business plan you'd like to support in Uganda. Donate online, and you can follow the progress of your client on the 'My Portfolio' page of the website. Through this website, SYPO intends to show sponsors the strength of microfinance in a very direct way, and collect funds for its ambitious growth plans.
Transparency of finances and governance
Since we ask the general public for donations through wwww.microbankieren.nl, we provide complete transparency of the finances and management of the microfinance project. The shares of the limited company are owned by the Dutch NGO SYPO, so that any profit the company would make must be reinvested into the project. All our paid employees are Ugandan, in Uganda. The company works with two unremunerated Dutch Directors with extensive experience in management and microfinance. Our Ugandan employees (Loan Officers) are all highly educated and enjoy high levels of autonomy and ownership in the company. The company is audited externally four times a year, and the shareholder Stichting SYPO and its Supervisory Board thoroughly checks the finances of the company quarterly. Please download the end-of-year external audit reports below.
Audit report SYPO Uganda Ltd. 2015.
Interest rates and transparency to clients
Microfinance interest rates are higher than those of conventional banks. The problem is that administrative costs are inevitably higher for tiny microlending than for normal bank lending. For instance, lending 100,000 euros in 1,000 loans of $100 each will obviously require a lot more in staff salaries than making a single loan of 100,000 euros. Every week, our Loan Officers use a network of simple field offices and repayment locations in the villages to meet each and every client. This ensures that we keep in constant contact with our clients - who are often not registered - and keep them in a 'repayment rhythm'.
Our interest percentage is 31% over the outstanding loan amount (declining interest rate). The clients repay in equal weekly installments over a year, so that, on average, they have only half the loan amount. This means that they pay 15.5% over the initial loan amount. A client who borrows 100 euros pays 15.5 euros interest.
We use a 'lean' business model; minimal management, no-nonsense operations and a relience on technology to keep costs to a minimum. This way we can also keep our interest to the clients as low as possible, and still cover the costs of the organization. At the moment, our interest of 31% is one of the lowest in Uganda. A high quality overview of interest percentagesin Uganda is maintained on this website by Microfinance Transparency. It shows that in the small loan (<3 million Uganda Shilling) segment, interest percentages are around 75% on average.
Even more important than interest percentage itself, is the way it is communicated to the clients. We try to be extremely transparent to the clients about the costs involved with the loan. We charge only interest - no other fees. We only charge interest over the outstanding amount - no flat fee. At the start of the loan and at regular intervals during the loan, we explain to the client the exact costs of the loan, both in interest percentage and in absolute amounts, through printed statements and text messages.
CGAP (a authoritative insititution in microfinance) has published to very interesting and clear papers on the cost build-up of microfinance interest rates, and development of this over time.
Microfinance interest rates and their determinants, Rosenberg et al. (2013)
Are microfinance interest rates excessive?, Rosenberg et al. (2009).
Several thousands of microcredits have been given out since the start of this project. The repayment percentage is still over 99%, and hundreds of more women have already expressed interest in receiving loans. SYPO Uganda Ltd. has grown fast and is financially sound. Still, this is not the final result we're looking for - the real result is social impact on the lives of the women and their families. To measure also these effects, we have started taking questionnaires with all new loans. We use the Grameen Foundation's 'Progress out of Poverty Index' (PPI), and some more questions about the wellbeing of the clients. The PPI also enables us to keep an eye on whether we are still serving the poorest of the poor (today >80% of our clients lives under the Ugandan poverty line of USD 2.50 a day). In 2009 we carried out an extensive impact assessment, comparing progress of our first microfinance project's clients with the progress of a control group. The results show that the project achieved a statistically significant improvement in household income, and several other indicators. Below you can download the full report.
Impact assessment SYPO microdevelopment 2015
Please contact us through firstname.lastname@example.org, with questions about our business model, the possibility of using SYMBA for your microfinance project, impact assessments, our financial results, or any other inquiries.