Clare Wavamunno: The presentation has actually turned out quite well in the sense that we got Javier to give us the overview from a CGAP point of view covering the whole world and then we got Victoria explaining how ACCION has done it for its affiliates. And so now I can bring in the issue of FINCA Uganda and how it's transforming….The outline of my presentation will be the background, mission and goals, elements of transformation, achievements to date, challenges, and lessons learned, and I shall conclude with frequently asked questions….A snapshot of FINCA Uganda as of August 2004…it had forty-five thousand four hundred and thirty-two clients, ninety percent of whom were women, a total loan outstanding portfolio of $6 million and savings of $2.5 million, financial self-sustainability of 110 percent, portfolio at risk over thirty days 2.1 percent, an average loan size of $134. And how we have transformed is actually moving from a regulated to a non-regulated institution meaning an institution that is going to be allowed to take public savings and ….on-lend to its clients. We shall also be required or we have been required to change from a company limited by guarantee into a company limited by shares because that is a pre-requisite of doing the first one…And then in order to do the two we have many related strategic and operational changes in the institution.

So, just to take you back to the vision and mission of FINCA Uganda; the vision is to become a profitable formal financial institution that provides products that are responsive to client's needs and demands and which continue to consolidate its competitive position. And the mission is to provide empowering microfinance services within Uganda's poor communities, particularly to women, and to have a positive social interaction through highly motivated staff.

I just wanted to make sure that we are able to compare the fact that transformation only enhances those goals. And so below is goals of transformation to utilize this particular new status; to significantly increase the client outreach with more and more services, to have a new and stable source of funding which is expected to be cheaper financially, establish a required ownership in governance and management with policies in place, and then, to strengthen the institution as a strong MFI. So, there is a fear…that perhaps if you transform, then you miss out on the original vision of the institution. We have found that it helps us to enhance that [original vision].

….Unlike the previous examples that have been given to us…FINCA Uganda's transformation is a reorganization of itself….So, rather than have the original NGO taking its assets and giving it to a new company this very one changes its form, but remains the same so there will not be an original NGO [and a newly formed company]. It'll be the same one…..

Then,…you have to revise all of your legal papers. …A Board must be accepted by the bank, a new capital structure agreed upon. You have the dialogue, you invest a lot of time and effort in dialoguing with the Central Bank with regard to how the new structure will look and how the new organization will look and how the management and the Board will all need to be approved by the Central Bank.

Then, on the operational side, yes, we have new products, that is the key thing that differentiates regulated institutions from non-regulated. And we've been experimenting with open access savings, group open access savings and limited access savings accounts. We are also taking the opportunity to market other products that we were not using before and give the clients a wider choice to choose from. Then operational systems must change significantly in order to take on the new products that we are taking on... So, before we didn't have teller operations, but now we do and we didn't have to report to an outside person like the Central Bank, and now we are training ourselves to be able to report regularly. We are not there yet but we are trying it. Also, on the operational side we have to have procedures for centralized branches because before, again, we were an NGO and everything was headquarter based, but now if the Central Bank wants to come and view, they will look at the managers and the regions to see that the savings selected there are safe, that the managers are competent and that the operations are smooth, that there are guidelines, and they are being followed and that there are controls, et cetera.

Again, the organizational structure has been changing because some [outlets] have been branches and some are decentralized, some are not. Some have limited decentralization and others are going to remain small agencies, but all of them are enabling us to capture the savings, to learn to be able to offer services to our clients and to reach out more…..

We've been monitoring ourselves and how ready we are to [meet] these Bank of Uganda requirements and one of them has been liquidity, something we didn't have before. We now have to make sure that the reports are accurate, they are on time, and hopefully with the new system they'll be automatically generated. Otherwise, it's a lot of extra work. Someone mentioned that when you transform you're given extra burdens and they may not have a cost to them that you see but it weighs down the institution. There are monthly reports that we need to share with the Central Bank. We're not required to do so now but we are using them so that we see the extent to which we are stopping that gap. And we are monitoring the penalties we would have had to pick if we were as late as we are late now and narrowing that gap. We continue to talk to potential investors because we know that the reorganization is a temporary one to be able to make the transformation first and then later on invite new players. And fundraising continues for one-off investment costs to enable us to transform.

Again, the achievements to date with regard to the explained background [are] that we've done the legal transformation that was in May [2004]. We've prepared and submitted the license, which was in August [2004] with a whole range of things, very, very many things to take along, and all [were] approved by the Board. Then we've been on the other hand refurbishing the offices. Those of you who knew FINCA Uganda maybe a few years ago, they were always going up country and operating out. Now we have to have branches, security, and all of that that we didn't have. Customer care has to improve significantly because if a customer is not happy with the way you handle the savings [they] can just go away to another bank. The corporate culture must change from the very top to the very bottom for all of us. And we also have to prepare for a Central Bank inspection, which is actually ongoing right now.

The challenges are the legal transformation. I think you got a hint of what it takes, a lot of work to be able to get it right. To get it right for now…for the medium term…and for the future. And how much the shares would cost now and how much the new person you'd want to sell [them to will pay] so you still remain benefiting et cetera and diluting and getting new people on board. The corporate culture, the corporate image must change for all of us. We have to now look at the whole public and not just the women, we include men and just everybody. Also, we have a wide variety of products when before we were concentrating on one. We have to change our management either internally or externally or a combination. Funding continues to be an issue because we have to raise a lot money for the technical assistance, the high operating costs, the security, the staff, and even securing the money and having to borrow…. And then we are piloting the products and we have to keep changing what doesn't work and then you must communicate to the ones implementing. You have to keep managing all of the stakeholders, the donors, the funders, the Board, the members, the potential investors, the public, the taxation, you know, it's a whole lot of things. And perfecting the IT system is not easy. It was easy when we had the original savings before, but now when we are combining teller operations, banking, and integrating and leaving bank branches to work on their own, it is a nightmare. And putting in place all of the policies and procedures to guide us through and keep changing those policies and procedures and documenting all of the processes that we go through. For staffing, we had a presentation yesterday by the HR manager explaining what those challenges are.

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