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BRAC Uganda shares strategy and sustainability insights from its transition from an MFI to a bank.

By Emily Coppel and Isabel Whisson, BRAC

Woman holds carton of eggs

©BRAC/Alison Wright

BRAC Uganda Microfinance is pursuing a shift in its regulatory status that will allow it to broaden the landscape of financial services it provides to Uganda’s rural poor.

BRAC, the largest microfinance provider in Uganda, currently serves more than 200,000 predominantly rural, female clients, through more than 150 branches across nearly every district in the country. In the nine years since the microfinance company was established, BRAC has provided microloans to poor women (a basic loan ranges from US $55 – $1,400), and small enterprise loans for male and female business owners (from US $1,400 – $10,000). Its current portfolio is around US $45 million. This year, BRAC submitted its application to transform into a bank. In Uganda, it was a Tier 4 institution, a category for unregulated credit-only NGOs, and money lenders. After the transformation, BRAC will become a regulated Credit Institution, under Tier 2, allowing it to expand its suite of services for clients – most notably, to savings accounts.

The process of transitioning to a regulated institution in Uganda is a lengthy one, and requires the organization to strategically analyze its goals and pro-poor model. Much can be learned from this process that can inform others considering a similar transformation to expand services for clients. As with any significant change, the organization is already facing new challenges that must be carefully and creatively navigated so as not to alienate its customer base.
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> Posted by Jacqueline Urquizo, Independent Consultant

Microfinance institutions (MFIs) have many questions to consider when developing new products. What are the future clients doing now?  What are their motives? What characteristics can help segment clients into appropriate groups? How large is the clientele?  Are there enough potential clients to warrant introducing a new product? How likely are clients to change specific behaviors? Are there key relationships between savings, credit and insurance needs?

We need answers to these questions to design products that respond to the market’s needs and are economically viable for institutions to provide. My research into how clients interact with financial services, The Financial Behavior of Rural Residents: Findings from Five Latin American Countries, looks at exactly these questions.

Many of the findings are intriguing. I was excited, for instance, to find that for many clients, the amount they save is more closely related to the objective for which they are saving than with their socioeconomic level. Read the rest of this entry »

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