In spite of the good
intentions behind most interventions to provide financing for capital-deficient
enterprising Ugandan youth, most Government interventions such as the Youth
Venture Capital fund have hardly lived up to the modest of expectations. Youth
Livelihood Fund (YLF), a programme that was hatched after the Youth Venture
capital fund has equally been dogged by analogous setbacks that had hit
precursor programmes. Simply put, the operational methodologies have room for
improvements.
Quite bizarrely, some
beneficiaries utilized the YLF money in ways that run counter to the core objectives
of the programme: Job Creation and Prosperity. Others sold off the livestock
they had acquired using YLF money within days. Others married new wives with
the borrowed seed capital money meant to finance their ventures. In the mean
time, some of the defaulters are on the run after failing to pay back the loans.
Of course there are some impressive success stories out there, but they are far
between.
Drawing from these
arrays of failures, it is imperative to isolate the root causes of the
stumbling blocks, with a view of revitalizing the operations of the otherwise incredible
programmes. In the first place, it can be observed that not everyone at any one
point can run a business successfully. Some minimal level of basic business
management skills is essential. Even for basic ventures such as poultry and
piggery, one requires an understanding of the market, cost-profit ratio, rate
of return on investment, risks and how to mitigate them. It’s hard for people
with limited knowledge of the enterprise they are running to ever make profits,
let alone growing their business. Some sort of business skills is required in
building successful business. In fact most borrowers needed more of skills than
they needed capital.
While recent Government-backed
entrepreneurship financing programmes such as YLF seem not to have performed optimally,
there are a number of private-sector financing schemes that are doing a great
job providing business financing for the youth. Rather than spending lots of
money and garnering minimal achievement, government is better off joining
forces with actors with proven track record of performance. GobigHub tops the list of enterprises
providing business financing for startups in Uganda.
GoBigHub does this by
connecting local entrepreneurs to local investors in a simple and straight
forward modality. GoBigHub reviews the financial needs of entrepreneurs and
forwards the request for funding to investors. Upon consent, investors provide
funding either as venture capital in exchange for a stake or as debt capital
which the entrepreneurs pay back after agreed period of time. GoBigHub equally
has an investment programme for micro-investors who pool together individual investments
of as little as 50,000 for a fixed period time after which they are paid a
pre-specified percentage of interest on capital invested.
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| Mr. Ojijo Pascal, Founder of GoBigHub.com |
Through GobigHub.com,
entrepreneurs provide the local investors with their financials such as their
capital needs, break-even analysis, proforma income statements and the proposed
exit strategy for the investors. The entrepreneurs choose whether they need the
capital in exchange for state (equity) or as a credit financing.
GoBigHub has so far
financed a portfolio of companies such as Poketi, a cross-network mobile money
payment app, CommonsenseApp, a market research and entertainment app; Naniwapi.com,
a platform that links course mates based on current location. Others are
Uzima Foods, a food supplement company, Achibella.com, a professional dating
website among others. The company has also funded a vast number of
micro-enterprises such as fish farming projects, vegetable growing and other
agribusiness ventures.
Unlike the YLF model
that dishes money to any group of youth regardless of their capacity or
strength of the business idea, the uniqueness of GoBig Model is that it appraises
the commercial viability of enterprises based on key metrics. The entrepreneurs
seeking funds should have a clear understanding of the problem they are
solving, the market size, demand. With these clear sets of criteria, nearly all
companies that are financed through GoBigHub have thus far been spectacular
success stories.
It is in the
government’s interest to enter into Public-Private Partnership (PPP) with
successful private sector actors such as GoBigHub to make financing available
to young entrepreneurs. The partnership
will enable the government to provide loans to borrowers at comparatively faster
pace and efficiency of a private enterprise. The plethora of political
interferences that suffocate most government projects will simply be untenable
in a PPP arrangement. As a lean and effective company, GoBigHub can only use a
limited portion of interest rates accrued on loans to cover administrative
costs. Government will save itself from operational costs it would have incurred
on running the programme on its own. In the dispensation of New Public Management
(NPM) model, states can take advantage of PPP to improve efficiency and quality
of service delivery.
The YLF evidently
lacked a comprehensive mechanism to appraise eligible loan applicants. GoBigHub’s
market-approach will ensure that the right entrepreneurs who have viable
business ideas get the seed financing. GoBigHub’s appraisal mechanism can
automatically knock out the types who use venture capital to marry new wives. The
enormous in-house expertise at GoBigHub is formidable enough to support YLF and
similar government programs to succeed.
The team at GoBigHub
is headed by Ojijo Pascal, a seasoned lawyer, entrepreneur, author and
international Guest Lecturer who is highly resourceful, with vast experience in
managing multi-stake holder organizations. Ojijo also has a record of high-profile
consultancies on collective investment schemes. A member of Financial Literacy
Panel of Bank Of Uganda, Ojijo has author 49 books, seven of which are on the
themes of collective investment schemes, entrepreneurship and financial
literacy. Outside of the founder, GoBigHub has a talented pool of Investment
Analysts, Risk managers and Portfolio managers who have a combined investment
and financial management experience of more than 100 years amongst themselves.
The sound corporate
governance credentials of GoBigHub coupled with its superior borrower appraisal
mechanism will enable the same pool of resources to be re-disbursed to
different cycles entrepreneurs continuously. The original intention of YLF has
been that after one batch of borrowers pays back the borrowed money; it is
disbursed to new applicants. Re-disbursement of the same pool of funds to new
borrowers hasn’t been smooth as some previous borrowers defaulted massively. The
borrowers didn’t just default, but most of them didn’t create jobs for group
members as had been expected.
That is precisely one
area where a partnership between the Ministry of Gender labour and Social
Development (MGLSD) and GoBigHub can revitalize the scheme. Nyadiedo.com, a mobile App and Web platform initiated
by GoBigHub makes the entire process of loans appraisal simple and seamlessly fast.
This platform makes it very simple for GoBigHub to scale up throughout the
country.
Such a partnership
will enable creation of viable businesses that can create jobs for the borrowers
and many of the peers who are wallowing in unemployment. Growing startup
businesses from one level to the next invariably necessitates coaching and
mentorship. GoBigHub has an arm that provides mentorship for entrepreneurs by
linking them with successful entrepreneurs who can mentor the young businessmen
to GoBig. GoBigHub also runs a Business Incubator which is fully furnished with
internet connection to provide co-working space young entrepreneurs who can’t
independently afford the cost of renting office space. Entrepreneurs only pay 200.000
per month or 10,000 per day to use the incubator.
GobigHub has an
ambitious target of setting up franchises in all major African Cities in ten
years and contributing significantly to Africa’s GDP.
Owachgiu
Dennis
The
Author is founder of DELPHI FINANCE, a Hedge Fund management Firm.
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