INCREASING ACCESS TO FINANCE FOR YOUNG AGRO - ENTERPRENEURS

GOU YOUTH VENTURE CAPITAL LOAN SCHEME

Revolutionizing Finance for Agri -Value Chain

14th – 18th July 2014Nairobi, Kenya

Outline

1. Background2. Centenary Bank Information3. Benefits to the CB4. Eligibility Criteria5. Design and Other Products6. Performance7. Management and Challenges

Youth Capital Venture Fund

GOU established the Youth Venture Capital Fund (YVCF) and Graduate Venture Capital Fund (GVCF) in FY 2011/12

The purpose of the fund was to support MSMEs to enhance employment creation and widening the tax base

The Fund comprised of $ 5 Million from the German Development Agency (KfW), with equal contribution by three participating Banks (Centenary, Stanbic, and DFCU Banks)

Youth Venture Capital Uganda has the Second World’s highest

youth population of about of about 7.4 million which is about 55% of the total population

Uganda has also the highest youth unemployment of about 83%

Rate is higher for those who have formal education because of disconnect of degrees achieved and skills needed in the job market

Un employed youth will find their way into crime like drugs, robbery and prostitution

These youth are likely to become a source of instability if government does not plan for them early

The Urbanization Phenomenon

Source: United Nations5

Youth PopulationCharacteristics

Male Female Total

Population(18 – 30) Years

2,913,800 3,381,800 6,295,700

Place of Residence

Urban 20.2% 22.9% 21.7%

Rural 79.8% 77.1% 78.3%

Age Groups

18 - 19 22.9% 20.2% 21.5%

20 - 24 36.3% 36.8% 36.6%

25 - 30 40.7% 43.0% 42.0%

Population by Age Group

Youth Access to Finance Youth like women is one of the marginalized

groups in access to financial services They are considered very risky due to

irrational decision making because of lack of responsibility

Most of the youth lack assets which can be pledged as collateral in Traditional Financial Institutions

This can be can be financed by lending to youth who are involved in productive economic activities

Lending to youth who are in JLG, Cooperatives and Farmers’ association

CENTENARY BANK HISTORY The bank is one of the biggest local bank

which was started in 1983 as a Credit Trust. Operations began in 1985, registered as

Commercial Bank in 1993. Objective to serve the poor and contribute

to development of the country. Bank vision and mission is being the best

provider of microfinance services to people in rural areas in a sustainable way.

Centenary Bank Ownership

CENTENARY BANK BRANCH NETWORK

Bank Market ShareItem Banking

Industry Centenary Bank

Percentage

Rank

Total No. Accounts

3,167,900 1,240,077 39.00 1st

Borrowers 1,395,700

147,950 10.00 1st

Branch Network

572 62 10.8 2nd

ATM Network

714 147 17.00 2nd

Deposits $ 4.568 Bn

$ 386 Mn

8.5 5th

Gross Loans

$ 3.186 Bn

$ 269 Mn

7.00 3rd

Assets $ 6.914 Bn

$ 580 Mn 8.4 4th

Profits $ 169 Mn $ 23 Mn 13.8 3rd

AWARDS Best Bank in Top

Fifty Brands 2011 1st Runner-Up in

2013 Financial Reporting Award

People’s Choice Quality Awards

NSSF Employers Awards

KACITA Quality Awards x 2

14

Benefits to Centenary Bank

Fulfill its mission of reaching out to rural and urban people

Increase its market share by reaching out to the biggest section of the population

Recruiting new clients who couldn’t qualify for accessing normal credit from the Bank because of the collateral requirements

Deposit mobilization through fund and deposits by the clients

Eligibility Criteria

Support business ventures by youth for expansion

Youth should be holders of at least O – Level Certificate later dropped for no education

Client should be first time borrower Business financed should be licensed and

registered by Uganda Registration Services Bureau

Business has been in existence for at least three month

Business able to employ at least four people Borrower must have been trained by identified

service providers by the project

Design of the YVCPRODUCT SPECIES DESCRIPTION

Target Clients Youth (18 -25) Years

Amount to be Financed $ 3.32 Million

Sectors Manufacturing, Agro Processing, Primary Agriculture, Fisheries, Livestock, Health, Transport, Education, Tourism, ICT, Construction , Printing and Construction Services

Loan Amounts $ 40 – 10,000 ( Individual $ 2,000 & Registered Grps – $ 10,000)

Grace Period Maximum One Year

Own Contribution 10%

Loan Periods Maximum 4 Years

Acceptance Commission 1%

Interest Rate 15%

Penalty 0.5% per day

Collateral Two Personal Guarantors, Other Acceptable Collateral

Other Youth ProductsPRODUCT FEATURES

Cente Junior Account Children Savings Account operated by parent or guardianTargeting of toddlers to a maximum of 17 yearsPurpose is for parents/guardian to save early for their siblings future and introduce them to banking

Benefits of Cente Account High interest rateFree Account statements, standing orders, no withdraw charges, account statements,Life Assurance covering life and disability

CenteVolution Youth Account

PRODUCT FEATURES

Cente Volution Youth Account CenteVolution Youth Account will be operated by youth in tertiary educational institutionsTargeting of toddlers to a maximum of 18 – 26 yearsCenteJunior account holders to graduate to CenteVolution Youth Account and start operating their accountTargeting Students in Tertiary Institutions soon joining the working class

Benefits of Cente Account Attractive interest rateNo account maintenance feeFree Bank drafts for school fees paymentFree account statement issued once a quater

Achievements

The Bank was able to disburse all funds(USD 3.32 Mn) including its contribution within five months

The Bank was allocated additional USD 1.2 Million, from other participating institution,

Another government body KCCA placed Youth Venture Fund of USD 1.32 Million in October 2012 with CB

Performance of NYVCNo. Parameters Numeric

1 Total Disbursement $13.517 Million

2 Total Number of Beneficiaries

8,789 Youth

3 Total Outstanding Loan Balance

$ 5.28 Million

4 Current Clientele 5,607

5 NPR 5.8%

Performance of NYVC

Sectors FinancedNo. Sector Enterprises Finance Percenta

ge

1 Agriculture Poultry farming, Cattle Keeping, Diary Farming, Honey Processing, Goat Rearing, Nursery Beds, Banana Farming, Coffee Farming

23.4%

2 Trade and Commerce

General Merchandise, General Supplies, SACCOs, Art and Design

53.1%

3 Service Industry Saloon and Barber shops, Clinics, Internet Café, Events Mgt, Tour and Travel, Cleaning Services, Bod-boda cyclists, Taxis

16.1%

4 Manufacturing Bakery, Honey processing, Carpentry, Shoe Making, Maize milling

4.5%

5 Building and Construction

Contracts and Tenders 2.9%

Management of Youth Loan Portfolio

Assignment of specific Credit Supervisor to manage the Bank Youth Portfolio

Assigning of the specific code in the MIS for close monitoring on utilization, portfolio growth and quality

Efficient client selection using existing account information, use of recurrent clients, groups, market authorities, and associations

Sound underwriting of youth loans with efficient analysis and appraisal

Management of Youth Loans

Efficient credit supervision of branches for compliance to credit policies and procedures

Partnering with other stakeholders like training institutions, NGOs like ILO, GIZ, SSLOA, KAMBA, VERMA Co and Associations

Aggressive recovery of non performing youth loans by the Bank

Challenges Poor attitude of Bank Staff towards the

scheme due character of youth and politicization of the scheme

Politicization of the scheme by some government leaders like MPs, Local Government Youth representatives

Lack of additional funds after exhaustion of allocated funds leading stoppage of disbursements

Lack of entrepreneurship skills by youth which leads to high rate of collapse of business leading to default

Challenges High taxes levied on youth

enterprises by government authorities which eliminates some clients who fail to qualify on eligibility criteria

Way Forward Increased supervision of Youth

Portfolio to ensure sound under writing of loans for a quality portfolio

Development of new credit products targeting youth i.e. CenteYouth Individual Loan Product, Group Loans and Asset Financing

Financial Literacy for young agro-entrepreneurs to equip them with business mgt skills

Way Forward Capacity building for credit staff in

evaluation of youth clients and groups to enable them mitigate risks associated with this age group

Establishing partnerships with other stakeholders like NGOs, Companies, Associations, Government and Training Institutions for complementing financial services with appropriate services and funding.

Thanks