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FutureLink de-risking approach lowers credit costs

Vincent Tumwijukye

Vincent Tumwijukye

The high operating costs shouldered by financial services providers have always been blamed for the high interest rates that businesses and people who want to borrow have to bear.

This has played a great deal in keeping many potential borrowers away, yet they would need the credit to advance themselves financially. Even Saccos and microfinance institutions (MFI), which extend credit to micro-enterprises and people at the bottom of the pyramid, were charging high interest rates because of the high risks involved in administering such small loans. 

Seeing this, FutureLink Technologies, which works with Saccos and MFIs across the country, set out through its Ecosystem core banking product, to de-risks the institutions it works with.

According to FutureLink Technologies CEO Vincent Tumwijukye, the firm manages all Saccos and MFIs’ network and server infrastructure, which has helped lower their monthly infrastructural expenses to $18 from $200.

Tumwijukye says the firm seeks to build the financial resilience of low and medium income earners in eastern Africa, by leveraging the relevance and outreach of Saccos and MFIs to enable them grow personal savings, access affordable credit and make payments using digital channels.

The company serves 300 Saccos and MFIs across the country, with a customer base of about 1.2 million, of which 390,000 are women. The company also offers a mobile banking switch, which enables end-consumers to access a variety of services provided by its partner Saccos.

This, Tumwijukye says, has empowered the end consumer and enabled them choose products that best serves them. He said at one of the Saccos, members access credit at 9.75% per annum.  

“It is the first time that we have a financial service provider offering credit for as long as 9.75%. Money lenders are lending at 240% per annum. This is a phenomenon because not even a commercial bank is doing that. This explains the power of leveraging technology,” Tumwijukye says.

The services can be accessed on a feature phone through the USSD, an App on smartphones and via the web. FutureLink  integrated with leading mobile money providers and Interswitch to ensure real-time transactions so as to build trust among users.

“We know that for the end-consumer in the village, the moment there is a slight challenge in verification or reconciliation, it will affect their confidence in the product. This was the first thing we resolved,” he says.

Bright future 

Tumwijukye says that Uganda’s fintech industry’s future is bright, owing to, among others, the enactment of the National Payments Systems Act.

“We are beginning to see more trust coming in from the different stakeholders as a way to advance the financial inclusion agenda,” he notes.

To further support the industry, Tumwijukye says there is need for the government to fight corruption and offer space for value creation.

Additionally, he says government needs to understand that FinTech is a platform upon which the economy ought to stand and thus rather than taxing it, support it to grow and then tax the services built on the platform. 

“Taxation needs to recognize the role of FinTech as a way to enhance accountability, to bring to limelight the value creation and as a way to get reasonable data upon which policy could be made,” he notes.

FutureLink is among the firms participating in the second edition of the 40-Days 40-FinTechs initiative organized by HiPipo in partnership with Crosslake Technologies, ModusBox and Mojaloop Foundation, and sponsored by the Gates Foundation.

Tumwijukye applauds HiPipo for the initiative, saying that it offers the industry a possibility of convergence of purpose. He, however, advises that fintech players need to move from just technology and being excited about having real-time settlement, to a greater purpose of enhancing the financial resilience of the people.

The HiPipo CEO Innocent Kawooya says fintech is the launch-pad on which the promise of full global financial inclusion will be fulfilled.

He, however, notes that fintechs need to be prepared with appropriate products and have appropriate real time payment systems in place to support an inclusive, interoperable digital marketplace that is both thriving and safe. 

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