Final Impressions

Hey everyone,

Sorry for the late post, as arriving home has been very busy, as I'm sure it has been for most of you. Leaving Uganda was something I feel we could all describe as bittersweet. As most of us had began to feel a little homesick and anxious to return home the last few days, we all knew we were ending one the the best experiences we have ever had and leaving some of the most interesting and kind people we have ever met. I can honestly say that going on this trip has changed some of my world views and has bettered me as a person.
This being most of our first trip to Africa it was hard knowing exactly what to expect, no matter how much one prepared. I think that no one expected to have the experience we had; whether we were learning about human rights, parliament policies, or agriculture methods, there was always something that surprised us. Still, I think what shocked us the most was the friendships and lasting relationships we have made with the MUBS students and other Ugandans we have met over our trip.
Leaving for the airport was such a surreal experience; as no one could actually believe this trip was over we all knew that we would miss all of our new friends. As everyone was leaving you could not help but to hear everyone making promises to keep in touch with each other. Though not many tears were shed, it was easy to see that everyone was going to miss their new friends as the MUBS bus pulled away.
For me, it was from these students who I learned the most from. The conversations and explanations of everyday life is really what helped me understand the culture the best. I feel that it was this aspect of the trip that makes it what it is: an immersion of cultures to create an exceptional learning experience.
Finally in relation to sustainable development, it was very interesting to see the wide variety of opinions that had been made over the course of the trip in a discussion the last night. One of the questions posed was along the lines of: "If you could choose one thing to change to better the opportunity for Uganda in sustainable development, what would it be?" Many answers from both Drake and MUBS students included corruption and primary education. Still there were many opinions and variations to the answers provided and it was interesting to see how each and every one of us had developed such strong opinions in this area. It was inspirational to see how involved everyone was in the conversation and how much this issue had become part of us.

What are some of your guys final impressions of the country and friends we have left?

Now that it has almost been a week since we've been home, have you kept in touch with your new friends?

After hearing many different opinions in our final discussion, what do you think is the one thing that can be changed that will improve Uganda's sustainable development?

Thanks everyone for an amazing trip and for the friendships we have made!!! I am so happy to have shared one of the best experiences of my life with every one of you!

Uganda Martyrs Shrine

Written by Kristin Krantz-Odendahl  reposted by Prof Root due to technical problems with the blog - (sorry the pictures were lost). 

French Missionaries came to Uganda to convert the locals and among those converted were several pages to the Buganda King. The pages were very loyal to their new faith and always took time for their prayers as well as not working on Sunday. The King became upset when they consistently defied his orders by putting their religion before his needs. He consulted a fortune teller who told the King that part of the palace burned down because of the Christians’ new faith. The King then consulted with his chiefs and decided to put the Christians to death. The Christian pages were separated from the non-Christians and persecuted. Three Anglicans were killed near the shores of Lake Victoria. Other Christians had their limbs cut off and scattered around the city to scare other Christians from the faith. The first catholic martyr was Joseph Balekuddembe who was beheaded and burned on November 15 1885 near Owino Market (Brittany talked about in her May 21 post). There is also a small shrine at that location. On June 3 1886 the rest of the martyrs were killed at the site of the church which was already a place of death – the execution site for the foulest criminals. The martyrs refused to renounce their faith so they were forced to gather firewood for their own burning. The martyrs were wrapped in the firewood and burned alive. At least one of the martyrs was unconscious prior to burning. He was the nephew of an executioner and refused to be saved. His uncle knocked him on the head to save him the pain of burning. The church itself is a cone shaped building styled after traditional African buildings. It is supported by 22 pillars, representing the 22 Catholic martyrs. Each of the wooden doors has people and scenes carved in to it such as the burnings and several bishops. The 1,000 seat church is open for prayer every day and is highly utilized. It features many pieces of religious art work including a sculpture of a martyr performing a baptism and a painting of the martyrs up in heaven with Jesus on the cross with the Ark below them.


The lawns are complete with very large lawns and an outdoor gazebo area where a mass is held every year on Martyrs Day, a national holiday commemorating the sacrifice of the martyrs. The area has several pavilions for different groups including a choir area and the stands reserved for the president and other political dignitaries. Martyrs Day is especially meaningful to Catholic and Christian Ugandans and people pilgrimage from the US and UK and some walk all the way from Kenya.

Here are some questions for reflection: Does this monument bring people together in rememberence or tear them apart due to different religions because of the significance placed on Christianity? What are the implications of a national holiday for Christian martyrs? What are the implications of having a yearly mass at the Shrine? Does the separation of church and government have a future in Uganda? What relation does this have to sustainable development? What else if anything struck you about the church, the grounds of the tour in general?

The Newspaper Industry

Uganda's largest media center is New Vision,which began in 1986 as just a weekly newspaper but has already expanded to daily news, a radio broadcast and TV station. The newspaper is printed in English and four local languages across the different regions, and they have two radio broadcasts, one in English and one in the Central Region language. New Vision also recently started a television station in the local language in order to bring TV broadcasting to the ordinary Ugandans who are not fluent in English.

When we toured New Vision, I think we were all pleasantly surprised at how nice the facilities were. Everything seemed very modern, and they just recently acquired a new printing press. We were shown the entire process of how the paper is created from start to finish.

Although the facilities were modern, we learned that Ugandan journalists are currently facing some tough challenges. While New Vision is partially private, the Ugandan government is the biggest shareholder. We were told that New Vision does not represent government views, but I don't see how journalists can report freely about the government and current politics if their jobs are basically controlled by the government. On the surface it appears that they can write what they want, but in the end, journalists have to be self-censoring themselves because their jobs could be on the line if they report something the government does not like.

This idea of self-censorship is also reflected in some Ugandan laws. While no one directly tells journalists what they can and cannot write, journalists know they have to be careful. Two laws, the law of sedition and the laws about interviewing terrorists, severely restrict how and what the journalists can report. Writing anything injurous to the government can earn a journalist a life sentence in prison. Journalists cannot report any interviews with known terrorist leaders, or they face the death pentalty.

Many journalists in the U.S. can face jail time for certain things, such as not revealing a source, but they would never be given the death penalty. These harsh laws and penalties in Uganda make me think that any political news is going to have a severe censor over it because journalists are so pressured and living in fear of being arrested and put to death.

These laws are a step backward for sustainable development in Uganda. Without a truly free press, Ugandans will not have the right information. We are very privaleged to have this is the U.S., and I think it is absolutely vital to keep the population informed. This seems basically like a type of political corruption in the Ugandan government, which creates a more unstable political environment throughout the country. If journalists are censored, no matter how indirect it is, Ugandans will be kept in the dark, making it easier for government officials to get away with corruption.

I also thought it was interesting to learn that 90% of the newspapers are sold on a daily basis, meaning only 10% of sales are through subscriptions. Since the newspapers depend so heavily on the daily whims of their customers, I feel like this would change the way the news is presented. Since they have so much pressure to market the papers well, I feel like the news will be presented differently. The cover story and headlines for the day determine the sales; there seems to be a direct relation between how eye-catching and interesting the newspaper is and how many papers sell. While this is still a driving factor for the media in the US, ultimately they have more security because of their subscribers. There will be less fluctuation from day to day in the US, make it a more stable industry.

If Uganda could establish a better system of subscribers, it will make the newspapers more sustainable, both for the newspaper and the population. The companies will have more reliable sales, and the population will be more informed because they will have access to the news every day without having to make a daily decision to buy a paper or not.

I think they can also broaden their sales by finding a way to make the newspaper cheaper, both in subscriptions and just buying an individual daily paper. Since so many Ugandans are poor, they have to make the choice between daily necessities and reading the news. If the news industry could find a way to decrease their costs for the consumer, it would increase access to the general population. They already have some success in access because they are printing in multiple languages. Now, they just need to find a way for Ugandans to more easily access the news through a lower cost.

Questions:

How do you think the internet is affecting newspaper sales now? Will this change in the future?

How do you think that radio and television stations that are controlled by the government will affect how Ugandans can access true, uncensored news?

Bujagali Falls

The Bujagali Falls were quite magnificent. There were many rapids and it was impressive watching all the water traveling through. While we did see the Bujagali Falls, we also traveled to the start of the Nile River. The river begins at Lake Victoria and travels 4000 miles through northern Africa to the Mediterranean Sea.

One surprising thing about both of these sites was the lack of tourist development. The tourism within this area could be expanded greatly. It would be profitable to have more resorts, restaurants, and shops around to increase both the amount of tourism and the length of a tourist’s stay. Expanding on activities available such as boat tours, kayaking or rafting through the falls, swimming or diving in the Nile, as well as 4-wheeling near the Nile would all increase tourism within both these sites and Jinja. However, more advertising and marketing would be necessary to ensure that people are aware of the attractions available to them. On the other hand, many people believe that activities designed to increase tourism in an area may destroy the beauty that these landmarks exhibit.

The plans to build two dams near the beginning of the Nile may ruin tourism within Jinja however. The building of the dams would destroy the Bujagali Falls, replacing them with a reservoir. Building the dams will also take several years which will help in providing work to Ugandans within the Jinja area. The dams, while increasing the amount of hydro electric power to Uganda, will destroy nearby habitat and harm local animals. The dams will also have a large impact on nations upstream. The dam will lessen the amount of water flow present within the Nile. This will decrease precious water supply upstream for both the inhabitants and any irrigation that the Nile is used for. Many people believe that this will upset countries upstream, possibly even beginning a war over the water the Nile River provides.

Questions to think about:

Would you increase tourism to the Bujagali Falls area? What impact would this decision have on Jinja’s economy?

Do you think that building the dams will help Uganda’s growth or hinder it?

What do you think are the major impacts of building the dams? Would it be a wise decision for Uganda to build them?

mulago hospital

If Uganda ever issued a FLOOD WARNING today would have been the day! Our entrance into the hospital was first stalled because of a rapid fury of rain drops. Once we finally entered the facility we walked through the assessment area where the potential patients waited to see if they would be admitted into the hospital. It was quite a sight to see because people were everywhere! They were sitting in the chairs, standing along the walls and sitting on the floor in every direction. Once we entered the board room we were introduced to Mr. Ssekabira who was the executive directors’ public relations guy. He took us through the hierarchical system of Uganda and explained to us how their health care system worked. There are 5 levels to their system, the lowest forms are titled Health Care three and Health Care four and the government primarily focuses on these two levels. The third level is distributed in every district and is called the District Hospitals. The next two specified levels of the health care system are considered referral hospitals. The 2nd most comprehensive level of health care is received at the Regional Referral hospitals and there are 11 around the country of Uganda. The most comprehensive is the one we visited called Mulago, it’s the National Referral Hospital and is the only one in the country. Mulago accepts only patients who are referred and who are in emergency situations. Mulago’s services are very comprehensive and have a range of departments and categories from acute pediatrics, to labor, to AIDS care. Mulago hospital also has an outpatient clinic for the less life threatening cases for those surgical/medical procedures that cannot be handled at any of the lower facilities in the country. We also met with Dr. Fred who is a physician of the hospital as well as an AIDS specialist and took us into depth about the services they offer to HIV/AIDS stricken individuals. They considered Mulago a tertiary institution with upper level surgical procedures, but said because of the nature of the location they use this as a primary care unit-which it is not. For their AIDS unit they have 2 comprehensive categories: preventive services and clinical care. After our discussion in the board room, a munch of medical focused students took a tour around the facility and we were able to see the pharmacy as well as a medical ward. They were both a sight to see because of the low supply of drugs as well as the overcrowding in the halls...

Questions:

The public relations guy said "that the health care system is broken down and does not work properly and says that the overcrowding is mainly due to the minor ailments that get admitted to Mulago". If the national hospital has the best of the best, do you think that it’s fair to turn away individuals for their “minor ailments”?

What role does health care access play in the sustainable development of an economy?

Do you guys think that quality health care is a necessity for development to occur?

Given the sights we saw at Mulago, if you had the chance, what range of services would you use funds towards to emphasize? Access to drugs? More technology? Training for doctors? Preventative health care? Which would be the best for the sustainable development for the country?

mulago hospital

Post by Kiconco Michelle

Hi
We went to Mulago hospital which is the national referral hospital that is funded by government and donations . We had a talk with one of the doctors who explained that mulago offers health services to ugandans and has branches in different districts: emergence services, complicated diseases, HIV care services, preventive services,clinical care and curative care, couselling and many more .
There have been irregularities in supply of drugs and people who come to the hospital have to get their drugs from a pharmacy. The key hospital departments are Accidental Emergency, Anesthesia, Obstetrics and Gynecology, Surgery, Internal Medicine, Pediatrics and Child Health, Laboratory, Pharmacy, Physiotherapy, Radiology, Radiotherapy, and Nuclear Medicine. The doctor said there has been widespread HIV, though most Ugandans don't know their status. There has been irregularities in supply of drugs, which could lead to more deaths. And Uganda is dependent on other countries for the drugs, which is a big problem. The pharmacy students from Drake said the pharmacy section of Mulago did not have drugs and patients have to be taken care of by their relatives, which they found strange and they think medicine should be supplied at the hospital and nurses should take care of the patients.
I think there should be improvements in the general services offered.

-Kiconco Michelle

Industrialization / Jinja

Being in Jinja for a few days, we were able to see many of the abandoned factories as well as the railroad which leads into Kenya. Also, we saw the source of the Nile and Bujagali Falls, as discussed in Lauren Asp’s post. These attributes all play a role in the explanation of an important industrial past that Jinja once played in Uganda.

Before Amin, Jinja was a booming industrial city. These industries included textiles, beer, cotton, and smelting (mostly copper). At one point, the textile industry alone accounted for ten percent of the Ugandan labor force. These industries chose to operate out of Jinja due to the readily available hydro-electric power resources. The railroad to Kenya also provided an excellent mode of export. These factories were run and owned by Indians during this time.

Conditions changed drastically for Jinja after Amin took power. The Indian owners were forced out and killed if they refused to leave. The factories were taken from them and became government enterprises. Amin gave many of these factories to his cohorts who quickly ran them into the ground as a result of their greed, corruption, and incompetence in managing the industry. This is why we see the vacant factories today.

After Amin’s overthrow in 1986, the NRM began privatizing these industries. Today, there is even a policy in place that if a person can prove that their family owned one of these businesses before Amin’s regime, the ownership will be returned. However, many of these factories are so run down that they are being sold at very low prices. Also, the Indians who are reclaiming their factories are generations removed from the individuals who actually operated the factories. These descendants no longer have the knowledge or the interest to run these dilapidated factories and usually choose to sell the land rather than revitalizing the factories and the area’s industrial sector. Today, re-privatizing of the Jinja industries is still taking place. For instance, large enterprises such as National Water still have yet to be privatized.

An additional detriment to the industrialization of Jinja is an industrial flight to Kampala in order to be closer to their markets. Additionally, the establishment of an industrial park within Kampala has also contributed to this industrialization failure. In Kampala’s industrial park, the government has constructed buildings, infrastructure, and utility plants so that different businesses can easily start manufacturing. This is where the Coca-Cola plant is now located.

Now, Jinja is largely reliant on tourism due to the source of the Nile and Bujagali Falls. It is unknown what the effect of the new dams will have on the area’s industrialization because of the flight of the businesses out of Jinja to Kampala. It is clear, however, that these dams will damage the tourism industry. The locals of Jinja have staged demonstrations in protest of the new dams to no avail. Government has countered protests with the industrial argument, saying that the electrical power is more important than local tourism. Locals, however, are largely reliant on tourism in and around Jinja; the rapid growth they have recently experienced and become accustomed to will come to a sudden halt. The government has compensated locals for use of their land. Despite this compensation, locals are still discontented. Some say that these people simply want to “have their cake and eat it, too,” while others claim that they were forced into giving their land to the government and they thereby have a legitimate gripe.

The countries to the north of Uganda on the Nile, including Egypt, Sudan, and the Congo are also very disgruntled with the construction of these dams. Although the countries do not mind the dam itself, which will provide clean energy through hydro-power. However, the nations fear that once these dams are constructed the water will be used as irrigation and therefore siphon water off of the Nile.

These factories have large effects on sustainable development. If Jinja is able to revitalize and regain its factories, Uganda will gain manufacturing power and expand its job market. This manufacturing power will also lead to a larger need for infrastructural improvements, such as roads and airports to export goods. This will also lead to further economic growth and diversification of the economy (instead of having 90% in the agricultural sector). However, this industrialization seems to come at a price to the environment, local communities, and foreign policy.

Questions to consider:

Where do you draw the line between environmental sacrifice and industrial improvements?

Is industrialization vital to the development of Uganda?

Should Uganda utilize the Nile even at the risk of a war over water?

Will the construction of these dams revitalize Jinja, or will the power just be exported and used elsewhere in the country?

Should these dams even be built? What property rights should the locals be able to exercise against the government in these eminent domain cases?

Note: Pictures included are of the dam, Jinja factories, a power plant, and the railroad leading to Kenya

Murchison Falls National Park

After the long drive to lunch, some of us ended up waiting over 3 hours for our food! The restaurant was not well organized - Dr. Root and Dr. Bishop ended up running the place so we could finally get our food. Dr. Root directed the kitchen staff while Dr. Bishop directed the wait staff and all the food was out in less than half an hour. It just seems like there's not really a sense of time here. I think the laid back culture was really reflected in our lunch experience and that's not really a good trait in terms of sustainable development because slow service definitely negatively impacts the tourism industry. Anying of the tourists who aren't backpackers are probably used to getting their food pretty promptly and would not react well to getting their food late all the time. If Uganda wishes to cater to a wider range of tourists, the level of service is one of the aspects that needs to be improved.

We ended up getting to Red Chilli at Murchison Falls (MFNP) around 6 o'clock and the keys were handed out to the bandas, tents, and the two little cottages. This Red Chilli was definitely more of a camping experience for some people, but they had a great area to hang out up by the reception. We were warned about hippos wandering into camp, but I don't think any of us saw any. There was a family of warthogs wandering around, though. My favorite part of Murchison Falls was getting to see the giraffes - my favorite - and get even closer to the elephants! It was amazing and the waterfalls were breathing taking. I've never seen a real waterfall before - it was so gorgeous. I was kind of disappointed that we didn't get to see lions, but all in all it was a great experience.

I was particularly interested in the couple of UCOTA (Uganda Community Tourism Association) shops we saw on the way to MFNP, but we didn't get to stop at them. As I was thinking about it though, I'm probably the only person who knew they were shops and that's only because UCOTA came up in my research on tourism. I don't see how UCOTA is really making a difference in communities surrounding national parks if tourists don't even know to stop at the shops. UCOTA claims to be assisting people in the communities by giving them a source of income from the sale of handmade crafts, however I don't think their vision really takes into account what the people in the community want. I also don't think that their really doing much because I don't see their shops getting much traffic, especially if our whole big group didn't stop there and I think Red Chilli at Kampala sends a lot of business to MFNP.

Based on what I saw, MFNP seems to appeal more to backpackers than any higher level tourists because it's more of a "roughing it" experience. MFNP is also in more of a remote location and because of the 2+ hours of driving on really bumpy roads, I'd classify it as tough to get to. Tourists with a lot of money aren't going to want to take a 6-hour ride there from Kampala, especially with rough roads. The speed and quality of transportation and roads are major inhibitors in terms of the tourism industry, in my opinion. Going along with our experience at lunch, the amount of and length of delays is a major challenge the tourism industry is going to have to overcome in order to widen Uganda's appeal as a tourist destination.

From working at a luxury travel company in the customer service department, I learned about the littlest things that wealthy tourists would not put up with. Based on this trip, I don't think Uganda is even close to being considered a luxury tourist desitination. The major draw that Uganda has in the luxury tourism industry is that they are on of the three countries in the world where people can see the last remaining mountain gorillas. I think that the exclusivity and expense of tracking gorillas definitely appeals to luxury tourists, but the infrastructure will deter those tourists from venturing elsewhere in Uganda.

Right now Uganda is appealing to backpackers because it's not really touristy yet, it's cheap, and it has an authentic feeling. However, if Uganda wants to increase their revenue from the tourism industry, which is where I see a lot of potential, then some major changes need to take place. Another market that isn't being tapped into in Uganda is family travelers - right now I don't see anything that is geared towards families traveling together. I see a lot of room for Uganda's tourism industry to grow and develop, but right now is a key moment where the country needs to make decisions and decide where funds are going to be focused. I think it would be a mistake for Uganda to become too touristy because right now what it has over some other destinations in Africa is that it is more of an authentic experience and it isn't overcrowded like major tourist destinations.

What do you think Uganda should focus on in terms of developing tourism?

What do you think Uganda needs to do in order for tourism to be sustainable?

How do you think tourism impacts the local community? Is it positive or negative? How can that impact sustainability?

Thanks for reading and I look forward to reading your comments!

- Kristin Kowalski

Patrick Bitature

I want to sincerely apologize for the delay on this post. I feel privileged to share with everyone what I found to be one of the most exciting days on our journey in Uganda. Patrick Bitature is one of very few educated entrepreneurs in Uganda. He has an outstanding network of professionals and an impressive resume that goes on for pages. He can easily be referred to as the Richard Branson of Uganda with his entrepreneurial endeavors ranging from telecommunications, radio and the hotel hospitality industry, to an extensive real-estate portfolio and everything in-between. He currently sits as the Chairman Board of Directors of Uganda Investment authority otherwise known as UIA. He shared with us the importance of entrepreneurship in Uganda and its impact on sustainable development, as well as unleashing the burning desire to turn dreams into a reality.

One of the repeating messages that Mr. Bitature brought forward was that power is knowledge and the importance of firsthand experience. A great quote he utilized went something like, “We can never learn solely from books and internet, it’s when we share and learn from one another, that we truly find something fantastic.” I have had the opportunity to attend several dozen professional speakers and seminars dealing with entrepreneurship and entrepreneurial success and they all seem to deal with basic principles like setting goals, managing overhead, paying attention to cash flows and being truly passionate about your idea. Mr. Bitature touched on all of the above, but something made him very different. Mr. Bitature expressed a passion for mankind. He believes that success is best shared. For example, it was really moving to hear of the efforts he makes to his employees. He expressed how he pays some of the best wages in Uganda and hires some of the most talented people from all around the world to work for and run his companies. It is evident the man has financial security and even expressed the idea that if an employee needed a new home, and it was in his means, he would build them a home. He expressed that only so much is learned in school and that real life stories and relationships with people are what matter most.

When it comes to entrepreneurship as a figure of sustainable development he expressed the challenges and opportunities that Uganda faces. It is easy to notice that with an unemployment rate of 60% job opportunities are scare. Speaking with some of the MUBS students there seemed to be an almost universal importance in being a job creator. Just driving down the roads it seems like everyone is just hanging out, and Mr. Bitature outlined this as a problem. The Ugandan culture is extremely laid back, he expressed the need to manage and respect time and until this happens, times will remain tough. Corruption also takes its tole on entrepreneurship. Entrepreneurs in Uganda need to be people of honor and integrity and learn from them now according to Birature. Finances are also an issue as lenders in Uganda charge extraordinarily high interest rates.

On the other hand for a young entrepreneur in Uganda, time is on ones side. Everything in one way or another comes down to business and the more we understand, the better off we are. Labor is very cheap in Uganda, but according to Bitature, giving someone a decent wage allows people to feel useful and build self-esteem. Entrepreneurship in Uganda is taking advantage of bountiful opportunity, harnessing creativity and the talents of others and achieving a common goal. Mr. Bitature finished his presentation with a very encouraging figure. He made the point that if Uganda could get just three percent of its population to become entrepreneurs that would mean that there is the potential of 1,120,000 entrepreneurs in the country. If each one of these entrepreneurs employed just 10 people, that would create 11,200,000 jobs. To me this spoke volumes on the importance of entrepreneurship in Uganda.

I ask everyone to consider the rewards of becoming an entrepreneur in Uganda. Identifying and tapping into an area that you are passionate about and the country needs will not only bring financial success, but better a nation. When it comes to sustainable development entrepreneurs are key. There is a very small private sector and very large public sector in Uganda. Entrepreneurship plays a key role in bridging that gap. Doing so creates jobs, decreases unemployment, and thus starts a domino effect. Just imagine what could happen if you started a company in Uganda that paid a wage that could afford a worker to build a house. Many of us I am sure have heard that when you build a house you both directly and indirectly employ 30 others. From plumbers and electricians to masons and carpenters, all those people need there materials from somewhere. Unfortunately right now many of those materials are imported (perhaps an area to look at getting into). Excessive demand in a building supply market if brought to Uganda only brings more jobs and more of a private sector. I am sure many are getting the picture and it’s that private sector/public sector gap that we must work towards bridging. While in my opinion it is the entrepreneur who will reap the most reward, consider the many people’s lives that you will also be enriching. Entrepreneurship is extremely powerful and Mr. Patrick Bitature was a great reminder of that. Like he said, “Capital should never be a problem; it should be a burning desire within that will drive you to your dreams.”

Perhaps this post has not come too late when we consider all of the small businesses and firms we have been able to experience throughout our journey. I ask for everyone to submit some feedback as to their thoughts on entrepreneurship and small business in Uganda. In particular, I ask whether or not you as an individual ever consider starting a business in Uganda? If so, what motivates you to do so? If not, what are your hindrances? In addition, in what capacities do you think entrepreneurship plays a role in sustainable development, and what reached out to you most about Mr. Bitatures presentation? I look very forward to receiving some great feedback, and as we reach the final days of journey ask that you keep your eyes and ears open to entrepreneurial opportunities in Uganda.

~Jeff Hirsch

Star Light Star Bright (Back From The North)

We traveled to Murchison Falls National Park on Friday and returned to Kampala on Sunday.  Internet access there was limited, which provided a great break for the students and faculty.  While we were gone Fred Luganda, one of our colleagues from MUBS posted some excellent information on the Ugandan martyrs and micro finance - two topics that we cover this coming week (look for reflection from studnets soon).  The only disappointment in the trip was the failure to see any lions in the park.  However we did see many hippo, giraffe, elephants, water buffalo, warthogs, multiple species of antelope and baboons (including one which jumped on our van in an attempt to steal our brown bag breakfast).   Our lodging was located on a hill overlooking the Nile river about 80 Km from the nearest main road. The place we stayed (Red Chilli @ Murchison Falls) turns of their electricity at midnight.  Seeing the wildlife is always an incredible experience, however it was equaled by the beauty of the night sky after the the electricity went off.  The stars were very bright and so abundant that they filled the sky.  Anyone who did not stay up late missed an incredible night sky that was so amazing it is difficult to put into words.  At a minimum it made you question why in the US we believe that every street must be lighted -- (is that sustainable and necessary?).

We are back in Kampala for only one night then head to Jinja for a few days to wrap up the trip.  There will likely be a rash of activity on the blog as we have some time to discuss and reflect on the events of the last three weeks, and students finish up comments and posts on the blog.   As everyone is starting to think about home I have heard many people talking about things they miss from home.  The stars last night made me think about things at home that we miss / overlook while there (when was the last time you stopped to look at the stars in the US and were amazed by what you saw?).   I wonder what other things we are missing when we go about our normal lives back home and what things about Uganda we will miss after returning to our daily lives in the US.  Anything come to mind after experiencing Uganda for almost three weeks?   I know for me the answer is the stars at Murchison Falls National Park.

Foundation for Human Rights Initiative

Posted by Taylor

The Foundation for Human Rights Initiative is an independent human rights advocacy organization in Uganda. Their support for each person’s right to life is completely not-for-profit and separate from the government. Their vision is “A strong and democratic human rights culture as a foundation for peace, stability, democracy, social justice, and sustainable development in Uganda.” Sheila Muwanga spoke to our group about the major services offered and issues faced by the organization. She focused a lot of her discussion on the overcrowding that is currently happening in Ugandan prisons. 53% of these prisoners are waiting to be tried. Holding these prisoners in remand is considered unlawful, but the lack of affordable and available representation makes it difficult for them to defend their rights. FHRI offers free legal services that allow inmates and other citizens to seek justice. FHRI was also involved in a fight against the growing number of inmates being placed on death row. The constitutional court ruled that inmates on death row for longer than three years will receive life imprisonment instead of the death penalty. More emphasis on mitigated factors for each case and each person’s right to life was defended by FHRI’s Right to Life Project.
Some recent changes in Uganda’s recognition of Human Rights have led to more fair treatment of the general population. The revised constitution recognizes a need for rights and equality. The addition of a Bill of Rights now backs up the entitled rights that were often overlooked in the past. Another recent change is the addition of separate political parties in Uganda which allow for different views to be considered. The government still struggles to give equal rights of expression and assembly to all. The media is still censored to an extent, rallies are dispersed quickly, and many feel as if the right to life is still not being respected by government officials.
I was very impressed with Sheila’s talk and her openness about the issues that FHRI faces. I respect the fact that they strive to give a voice to those who often go unheard. It was very interesting to hear about the overcrowding within the jails because that is something I never would have thought about as a Human Rights issue. I went into this experience thinking that we would hear a lot about the rights of women, children, and gays, but these topics were only addressed minimally. I think that improvement in human rights efforts is a huge step in the right direction for sustainable development in Uganda. Now that the improved Constitution includes a Bill of Rights, enforcement needs to become the focus of their efforts. We have seen a lot of evidence that this country is very corrupt. I think that this corruption is affecting people’s openness and willingness to get involved with these issues. Many important advances have been made in recent years, but there is still a lot of work to be done to ensure the rights of all citizens in Uganda.
Questions:
What did you think of Sheila’s talk? Is there anything that surprised you? What would you have liked to hear more about?
Do you think that recent advances in Human Rights are affecting Uganda’s sustainable development? How so?
What do you think the next step in Human Rights in Uganda is?

Uganda Stock Exchange and Crested Crane Securities

Written by Ryan Boatman

Today we visited the USE, or the Ugandan Securities Exchange and Crested Brokerage Firm and what an experience it was. We first went to the exchange, which was much different than what we encounter in the United States. On what we would call the “floor”, about 5 brokers were responding to calls about buying and selling shares of 12 publicly traded companies. Although this sounds very small, the USE is fairly new as it is in its twelfth year of operation. What shocked me was that they were using a white board to register all of their transactions, which is completely different from the electronic world the NYSE, Nasdaq, and others use. This manual way of striking deals causes the USE to be way behind the times in terms of trading. Bombay currently trades 6000 times a day, a number of transactions that would take 4.5 years for the USE to complete. The USE is open to the public, which is not the case for the NYSE. Another major difference is the fact that the USE only trades Monday, Tuesday, Thursday from 10:00 AM to 12:00 PM, as the United State’s exchanges trade for five days a week from 9:00 AM to 5:00 PM. This shows a large difference in the interest in the markets and how big of an impact each market has on its’ economy.


Once we were done touring the exchange floor, we sat down and learned a little about how the stock market works in Uganda. I was pleased to hear that the USE is in the process of going electronic, which will help it compete in the global market. It will also allow investors to trade from their homes, just like Americans do with E-Trade, Scottrade, and other online brokerage firms. It will also drive costs down and speed up the pace of the USE to compete with markets like Bombay. I believe this is a huge development for investing in Uganda, as more people will have access to the markets.

We then left the exchange and went to Crested Brokerage Firm, whose Chief Executive Officer is Robert Baldwin, a Wisconsin native who moved to Uganda. He discussed the potential of the Uganda markets and how his motive was to pursue smaller investors that are natives of Uganda. He said that there are only about 30,000-50,000 investors in the market currently and of those about 600 are Crested investors. Not bad for a company that started its’ efforts in 2005.

I think that the USE and its’ brokerage firms that are involved are a huge part of the future of sustainability of Uganda. As the country becomes more stable and the unemployment rate goes down, more people will have excess income to invest in the markets. As the economy grows, more international investors will see the opportunities that exist and will invest in the markets as well.
What were your opinions of the USE?

Do you think that the USE will be a driving force in the sustainability of Uganda in the next few years?

Ugandan Parliment

Similar to the British parliamentary system Uganda has a Prime Minister, a President, and a Parliament. At the beginning of each session the speaker of the house enters with an assembly of important people that are visiting the parliament of that are important to the meeting. They also have a ritual gold mase that has to be present at every meeting. The Parliament is broken up into different representatives from the different regions and groups of Uganda. Some examples of these regions are women’s rights, the youth, and disabilities, and army. In total there are over 300 people involved in parliament meetings. The parliament building was built in the late 1950’s when the representatives were British and they did not need a lot of parliament seats. There are only 150 seats that I counted and although not everyone in parliament attends every meeting it is still a very crowded place. During our visit they were under construction of a new building that would host more people and sit them comfortably during their meetings. Apart from the meeting area the Parliament building hosts the offices of most of the representatives for the country.


The parliament building also hosts a lot of historic items and pictures of Uganda. One of the most amazing things I saw was the display of the two different futures for Uganda. The first was a wasteland that showed what Uganda would be if they do not start changing their ways. The other was a prosperous land with growing crops healthy people. This is the future that the parliament is working toward and what would be the best for the environment and Uganda as a whole.

Along with the representative and progressive symbols in the building there is also a lot of historic items. We were able to see the pictures of the past speakers of the house and parliament bodies. The most interesting thing to me was the Ugandan flag that the United States brought to the moon and back for Uganda. Along with the plaque that stated the space flight and date that the flag was on the moon was a piece of lunar rock that was brought back and given to the Ugandan Parliament by President Nixon.

Over all, our visit to the Parliament system was very interesting and I feel like I learned a lot from our tour and the information presented to us about the parliament.

Sincerely

Carmen Anderson

UGANDA MARTYRS

Extracted from www.buganda.com

The arrival of the Christian missionaries, Anglican and Catholic, set the stage for new developments, and marked a turning point in the religious life of the people of Buganda; as well as the political structure of the kingdom and the region at large. The history of Buganda from this point on took a different turn. A social revolution that was to transform all aspects of people's lives had set in, and the events that followed, unpredictable as they were, added to the discomfort the new changes had brought about. The untimely death of Mutesa I in 1884 just a few years after the arrival of the missionaries, left the kingdom in the hands of Mwanga II, a youth whose ruling style fell far short of the charisma and political astuteness his late father had demonstrated in dealing with the foreigners.

Mutesa had the astuteness and maturity of dealing with conflicting forces that struggled to influence his court. The Arabs (the Moslems), the Catholics (the French or Bafaransa as they were locally called) or the Protestants (the English or Bangereza) operated, of course not without constraint, with some minimal success during his reign. He let his subjects of all ranks to join any creed of their choice. The Arabs also having seen the Christian missionaries' efforts to convert the local people also diligently started to teach Islam. There was a competitive struggle among the preachers of the new creeds each attempting to assert more influence and recognition among the most influential officials in the inner circle of the king's court. The king himself never committed to any single creed. The Moslems denounced him for his refusal to be circumcised, and he could not be baptized in the Christian denominations because he did not want to give up polygamy. He died still a traditionalist.

The Christian religion was received with much excitement by the converts but it came with its own requirements. It denounced all the native religious behavior and practices as heathen and satanic. Therefore joining it meant a commitment to break away from the old life style, make and adopt new alliances, and adjust to new moral and religious standards, adherence and allegiance. The new flock of believers ( abasomi, or readers, as they were called) therefore, were seemingly regarded as 'rebels' who had transferred their loyalty to new religious systems thus abandoning the old tribal traditions.

Although Mwanga had shown some love for the missionaries as a young prince, his attitude changed when he became king. The once lively and enthusiastic prince in support of the missionaries turned into an intolerant and vicious persecutor of Christians and all foreigners. He felt, with good cause, that the powers and authority his predecessors had enjoyed were dwindling, and had disintegrated under the influence of the missionaries and their converts. The converts had diverted their loyalty to some other authority and their allegiance at all costs could no longer be counted on. For Mwanga, the ultimate humiliation was the insolence he received from the pages when they ( the least subservient of servants) resisted his homosexual advances. According to old tradition the king was the center of power and authority, and he could dispense with any life as he felt, hence the old saying Namunswa alya kunswaze (the queen ant feeds on her subjects). Although homosexuality is abhorred among the Baganda, it was unheard of for mere pages to reject the wishes of a king. (It is alleged that Mwanga learnt or acquired homosexual behavior from the Arabs). Given those conflicting values Mwanga was determined to rid his kingdom of the new teaching and its followers.

It was hardly a year after Mwanga's assumption of the throne that he ordered the execution of Yusufu (Joseph) Rugarama, Makko (Mark) Kakumba, and Nuwa (Noah) Serwanga the first three Christian martyrs, who were killed at Busega Natete on January 31, 1885. In October of 1885 the Anglican Bishop James Hannington recently dispatched to head the Eastern Equatorial Africa, headquartered in Buganda, was murdered in Busoga on his way to Buganda. Mwanga had ordered his death. Hannington's crime was to attempt to come to Buganda through Busoga, a shorter route than that employed by earlier visitors who took the route from south of lake Victoria. Buganda's kings regarded Busoga as a backdoor to Buganda and thought that any one coming through the backdoor must have evil intentions towards the kingdom.

Joseph Mukasa Balikuddembe, a senior advisor to the king and a Catholic convert, condemned Mwanga for ordering Hannington's death without giving him (Hannington) a chance to defend himself as was customary. Mwanga was annoyed that Mukasa would question his actions, and he had him arrested and killed. On Nov. 15 1885; Mukasa became the first Catholic martyr, when he was beheaded at Nakivubo. Between December of 1885 and May of 1886 many more converts were wantonly murdered. Mwanga precipitated a showdown in May by ordering the converts to choose between their new faith, and complete obedience to his orders. Those unwilling to renounce their new faith would be subject to death. Courageously, the neophytes chose their faith. The execution of twenty six Christians at Namugongo on June 3, 1886; was the climax of the campaign against the converts. The last person killed in this crusade, was Jean-Marie Muzeeyi, who was beheaded at Mengo on Jan 27, 1887. The complete list of the known martyrs is given below. The list of forty five known Catholic and Protestant martyrs includes only those who could be formally accounted for, many more murders went unreported and without a record.

Uganda's Christian Martyrs

Martyr's Name		Birthplace	Clan	Religion	M A R T Y R E D
					Date	Place	Manner
1	Kakumba, Makko	Buganda	Ffumbe	Anglican	Jan 31, 1885	Busega	Dismembered and Burned
2	Rugarama, Yusuf	Ankole		Anglican	Jan 31, 1885	Busega	Dismembered and Burned
3	Sserwanga, Nuwa	Buganda	Ngeye	Anglican	Jan 31, 1885	Busega	Dismembered and Burned
4	Balikuddembe, Yosefu Mukasa	Buganda	Kayozi	Catholic	Nov 15, 1885	Nakivubo	Beheaded and Burned
5	Mukasa, Musa	Buganda	Ffumbe	Anglican	May 25, 1886	Munyonyo	Speared
6	Kaggwa, Anderea	Bunyoro		Catholic	May 26, 1886	Munyonyo	Beheaded
7	Ngondwe, Ponsiano	Buganda	Nnyonyi Nnyange	Catholic	May 26, 1886	Ttakajjunge	Beheaded and Dismembered
8	Ssebuggwawo, Denis	Buganda	Musu	Catholic	May 26, 1886	Munyonyo	Beheaded
9	Bazzekuketta, Antanansio	Buganda	Nkima	Catholic	May 27, 1886	Nakivubo	Dismembered
10	Gonza, Gonzaga	Busoga	Mpologoma	Catholic	May 27, 1886	Lubowa	Beheaded
11	Mbwa, Eriya	Buganda	Ndiga	Anglican	May 27, 1886	Mengo	Castrated
12	Muddu-aguma			Anglican	May 27, 1886	Mengo	Castrated
13	Mulumba, Matiya	Busoga	Lugave	Catholic	May 27, 1886	Old Kampala	Dismembered
14	Muwanga, Daudi	Buganda	Ngonge	Anglican	Namanve	Castrated
15	Kayizzi, Kibuuka	Buganda	Mmamba	Anglican	May 31, 1886	Mityana	Castrated
16	Mawaggali, Nowa	Buganda	Ngabi	Catholic	May 31, 1886	Mityana	Speared, Ravaged by wild dogs
17	Mayanja, Kitoogo	Buganda	Ffumbe	Anglican	May 31, 1886	Mityana	Castrated
18	Muwanga	Buganda	Nvuma	Anglican	May 31, 1886	Mityana	Castrated
19	Lwanga, Karoli	Buganda	Ngabi	Catholic	June 3, 1886	Namugongo	Burned
20	Baanabakintu, Lukka	Buganda	Mmamba	Catholic	June 3, 1886	Namugongo	Burned
21	Buuzabalyawo, Yakobo	Buganda	Ngeye	Catholic	June 3, 1886	Namugongo	Burned
22	Gyaviira	Buganda	Mmamba	Catholic	June 3, 1886	Namugongo	Burned
23	Kibuuka, Ambrosio	Buganda	Lugave	Catholic	June 3, 1886	Namugongo	Burned
24	Kiriggwajjo, Anatoli	Bunyoro		Catholic	June 3, 1886	Namugongo	Burned
25	Kiriwawanvu, Mukasa	Buganda	Ndiga	Catholic	June 3, 1886	Namugongo	Burned
26	Kiwanuka, Achileo	Buganda	Lugave	Catholic	June 3, 1886	Namugongo	Burned
27	Kizito	Buganda	Mmamba	Catholic	June 3, 1886	Namugongo	Burned
28	Ludigo, Mukasa Adolofu	Toro		Catholic	June 3, 1886	Namugongo	Burned
29	Mugagga	Buganda	Ngo	Catholic	June 3, 1886	Namugongo	Burned
30	Sserunkuuma, Bruno	Buganda	Ndiga	Catholic	June 3, 1886	Namugongo	Burned
31	Tuzinde, Mbaga	Buganda	Mmamba	Catholic	June 3, 1886	Namugongo	Burned
32	Kadoko, Alexanda	Buganda	Ndiga	Anglican	June 3, 1886	Namugongo	Burned
33	Kifamunnyanja	Buganda		Anglican	June 3, 1886	Namugongo	Burned
34	Kiwanuka, Giyaza	Buganda	Mpeewo	Anglican	June 3, 1886	Namugongo	Burned
35	Kizza, Frederick	Buganda	Ngabi	Anglican	June 3, 1886	Namugongo	Burned
36	Kwabafu	Buganda	Mmamba	Anglican	June 3, 1886	Namugongo	Burned
37	Lwakisiga, Mukasa	Buganda	Ngabi	Anglican	June 3, 1886	Namugongo	Burned
38	Lwanga	Buganda		Anglican	June 3, 1886	Namugongo	Burned
39	Mubi-azaalwa	Buganda	Mbwa	Anglican	June 3, 1886	Namugongo	Burned
40	Munyagabyangu, Robert	Buganda	Mmamba	Anglican	June 3, 1886	Namugongo	Burned
41	Muwanga, Njigija	Buganda		Anglican	June 3, 1886	Namugongo	Burned
42	Nakabandwa, Danieri	Buganda	Mmamba	Anglican	June 3, 1886	Namugongo	Burned
43	Walukagga, Nuwa	Buganda	Kasimba	Anglican	June 3, 1886	Namugongo	Burned
44	Wasswa	Buganda	Mmamba	Anglican	June 3, 1886	Namugongo	Burned
45	Muzeeyi, Jean-Marie	Buganda	Mbogo	Catholic	Jan 27, 1887	Mengo	Beheaded

In his efforts to curb the Christian influence and try to regain the traditional and customary powers and authorities over his subjects, Mwanga was adding more chaos to an already chaotic situation. In the north Kabarega (the king of Bunyoro Kitara a traditional arch enemy of Buganda) was raging, fighting off the pending invasion from the Khedive of Egypt and for sure he never lost his intentions towards Buganda. Further south it was reported that the Germans were annexing territories in the regions of the present Tanzania, and Mwanga was caught in a threatening position. His suspicion of the missionaries was therefore real. Buganda also was experiencing internal strife, the Moslems were plotting to overthrow him and replace him with a Moslem prince. The political upheavals combined with religious instability constrained the country's moral stamina. The kingdom was thrown into turmoil; Moslems fighting Christians, traditionalists plotting against all creeds, untimely alliances concocted to survive against a common foe and later unceremoniously discarded. The kingdom broke into civil strife during which Mwanga was briefly deposed, although he was able to regain his throne later.

Rather than deter the growth of Christianity, the martyrdom of these early believers seems to have sparked its growth instead. As has been observed in many other instances, the blood of the martyrs proved to be the seed of faith. Christianity (in its various flavours) is now the dominant faith in Buganda and Uganda as a whole. The 22 known Catholic martyrs were declared "Blessed" by Pope Benedict XV in 1920. This is one of the key steps in the catholic tradition that eventually leads to canonization. The 22 Catholic martyrs were indeed canonized by Pope Paul VI on October 18, 1964; during the Vatican II conference. Thus these martyrs were now recognised by the universal church as being worthy of being honored as Saints. This was a first for modern Africa and a source of pride throughout the continent.

Basilica Church of the Uganda Martyrs, Namugongo.
Notice the traditional 'kasiisira' style of this modern structure.

To honor these modern saints, Paul VI became the first reigning pope to visit sub-saharan Africa when he visited Uganda in July 1969; a visit which included a pilgrimage to the site of the martyrdom at Namugongo. He also dedicated a site for the building of a shrine church in honor of the martyrs, at the spot where Charles Lwanga was killed. The shrine church itself (shown above), was dedicated in 1975 and it was subsequently named a basilica church, a high honor in Catholicism. Archbishop Robert Runcie of Canterbury, and head of the worldwide Anglican Communion, also came on pilgrimage in January 1984. Pope John Paul II in turn honored the martyrs with his own pilgrimage in February 1993. Every year, June 3rd, when most of the martyrs were killed, is marked as a national holiday in Uganda. It is also marked worldwide on the church calender as a day to honor the Uganda Martyrs. Following is a portrait of the 22 canonized Catholic martyrs.

Are Microcredit Interest Rates Exploitative?

An interview with CGAP expert Rich Rosenberg

June 17, 2008

An interview with CGAP microfinance expert Rich Rosenberg

The last few years have seen increasing criticism of microcredit interest rates. Many people feel it is unfair to charge poor people rates that are a lot higher than those that wealthy people pay on bigger loans. In the context of some sensational headlines around the issue, we asked CGAP microfinance expert Rich Rosenberg to give us some more background on the issue.

1. To begin with, how high are microcredit interest rates?
When the Mexican MFI Compartamos sold shares to the public last year, there was an outcry about its interest rates, which were above 100 percent a year for a while. Some people got the mistaken impression that such rates were typical for microcredit. In fact, the median interest rate for the 700 MFIs in the Mix Market database for 2006 was 30 percent (22 percent net of inflation).

2. What's the trend—are rates moving up or down?
Actually, it's surprising how fast microcredit rates have been dropping—3.3 percentage points per year from 2000 to 2005. I'd guess that most of this drop is a reflection of the learning curve as new MFIs figure out how to squeeze down their operating costs. But some of it is because of competition, which has been heating up in the countries where the industry is most advanced. Competition will certainly get more intense over the next decade, exerting more downward pressure on rates.

3. Are the rates unreasonable? Are poor borrowers being gouged?
That's the most important question, isn't it? Obviously, we can't expect a one-size-fits-all answer: it would depend on a detailed analysis of each MFI, its market, and its borrowers. CGAP argued in a recent paper [CGAP Reflections on the Compartamos Initial Public Offering] that the Compartamos interest rate has been a lot higher than it should have been, but that's an exceptional case. The picture differs widely by institution, and by country, but I think we can shed some useful light on the overall situation (CGAP will soon be publishing a study of the issue in a forthcoming Focus Note.)
One approach is to compare MFI interest rates in a country to the rates on other kinds of small loans that lower income people use. The idea is that making lots of small loans will inevitably cost more than making a few big loans, so what kind of rates are charged by other small lenders? Where we've been able to get data, it appears that MFIs almost always charge far less than informal moneylenders. They're in roughly the same ballpark as rates on credit cards and other consumption credit. MFIs tend to charge more than credit unions, though we find that MFIs with banking licenses charge less than credit unions on average.
The most powerful approach to the question of whether interest charges are too high is to look at the individual cost items that those charges cover (cost of funds, loan losses, and administrative costs) and the profit that's left over after paying the costs.
MFIs borrow much of the money they lend out, and the interest they pay on these borrowed funds ties up about a quarter of their interest income from their clients. It doesn't seem too useful to argue about whether these funding costs are too high, because MFI managers usually have little control over what their outside funding sources charge, in the near term at least.
Managers have a lot of control over loan losses, but in good MFIs these are only a tiny factor, about 1-1.5 percent.

4. It sounds OK so far, but what about profits?
Few MFIs make really high profits: the median inflation-adjusted return on loan portfolio for MFIs worldwide was 1.1 percent in 2006. MFI profits are much lower than what one would typically see in an emerging industry, before competition sets in—so much so that very few MFIs are attractive investment targets for commercial, profit-maximizing investors.
It's important to note that profit is a fairly small piece of interest income. Let's take an MFI that is charging its clients 30 percent interest and making a profit of 4 percent on portfolio (four times the median). If it cuts its profit back to only 1 percent, it still has to charge clients 27 percent.
The big factor is not profit but administrative costs. The administrative cost of managing tiny loans eats up roughly two-thirds of the interest clients pay. It's not easy to get a statistical handle on whether these costs are "too high." Figuring out whether an MFI can cut its administrative costs without hurting the quality of its service requires detailed analysis of an individual MFI's circumstances and clientele. In general terms, we can be sure that there is room for more efficiency, because microcredit is still a relatively immature industry in most countries. Costs are always higher in immature industries. Those industries get more efficient over time, based on their own internal learning curve as well as the pressure of competition. Of course, we would all like to see efficiency improve as fast as possible, but it's unrealistic to expect that to happen overnight.

5. So what's the answer? Are microcredit interest rates unreasonably high?

Let's say that rates are "unreasonable" if MFI managers could be charging clients substantially less, even after taking into account the small sizes of the loans and the inevitable learning curve of institutions and national microfinance industries. We don't have enough data to provide a conclusive answer to that question. But based on a reading of the data we do have, I'll hazard an impression: I think there are a few MFIs out there charging unreasonable rates, but only a few. I think a vast majority of microcredit borrowers are paying rates that are pretty fair in light of the loan sizes and the early stage of the industry in most countries.

6. What should governments be doing about microcredit interest rates?
People who are shocked by microcredit rates that strike them as exploitative often want the government to impose interest rate caps. CGAP continues to think that the effect of such caps would usually be to limit poor people's access to credit. When a government body sets a maximum rate, it is politically difficult to set it high enough to cover the inevitable extra cost of making tiny loans. If microlenders can't charge enough to cover those costs, they are less likely to continue or expand services. We think it may be more useful to look at other consumer protection measures, like requiring clear disclosure of loan costs. Early evidence supports the proposition that increasing competition, along with the learning curve, will continue to push interest rates lower and efficiency higher

Microfinance Interest Rates as a Function of Transaction Costs

It is often observed that the interest rates charged to borrowers of micro-loans are quite high. According to the United States Federal Reserve Board, the average interest rate charged by commercial banks for a 24-month personal credit loan was 12.22% in the third quarter of 2005. The average annual percentage rate charged on credit card debt was only slightly higher at 12.48% for Q3 05; yet the APR charged for a typical loan by microfinance institutions (MFIs) in India ranged from 20% to 40% (p.4) in 2003. In lesser developed nations such as Indonesia or the Philippines rates reached up to 80% (p.4). These rates are quickly and errantly decried as exorbitant and usurious, when, in fact, they are the product of some of the most fundamental principles of economics and are advantageous not only for the lender, but the borrower as well.

Interest rates charged for lending are a function of a number of factors, of those, transaction costs and risk figure prominently into the derivation of microlending interest rates. Microlenders are subject to significantly higher transaction costs than banks in the developed world, both in absolute and relative terms. Three types of costs (p.3) are associated with the lending process: the cost of funds for on-lending, the cost of risk (loan loss), and administrative costs (identifying and screening clients, processing loan applications, disbursing payments, collecting repayments, and following up on non-repayment).

With regard to loan administration, Microcredit is an industry that is heavily dependent on personal contact for its execution (p.2). This is very time-consuming and resource intensive, and allows each loan officer to reach only a limited audience of potential borrowers.By contrast, much of the administrative process for commercial banks leverages technology for computerized credit scoring, communication with clients and payment processing. Not only is the administrative process less efficient for a microlender for each loan, but the problem is compounded further by the fact that while a developed commercial institution may lend a large sum of money to one borrower, a micro-lender will lend very small sums to many borrowers, thereby multiplying the total administrative costs by X number of borrowers.

The factors noted above contribute to a higher absolute transaction cost per loan, it is also important to note that the transaction costs relative to the loan size are considerably higher.The following example on Microcredit Cost Structure from a paper by Brigit Helms and Xavier Reille, both of CGAP, (p.2) clearly illustrates this principle:

“Compare the costs of two hypothetical lenders, Big Lender and MicroLender, each of which lends US $1,000,000. Big Lender makes a single loan, while MicroLender makes 10,000 loans of US $100 each.

The costs of capital and loan loss risk vary proportionally with loan size. Both lenders need to raise US $1,000,000 to fund their loans and will have to pay the same market rate—say, 10 percent—for the money. If both lenders have a history of losing 1 percent of their loans to default each year, they will need a loan loss provision of that amount. Both lenders can cover the cost of their capital and their risk by charging 11 percent (10% + 1% = 11%) on the loans they make to their customers.

Administrative costs are not proportional to loan size. Making a single loan of US $1,000,000 might cost Big Lender US $30,000 (3 percent of the loan amount) in staff time and other expenses involved in appraising, disbursing, monitoring, and collecting the loan. Big Lender can cover all its costs by charging the borrower an interest rate of 14 percent (10% + 1% + 3% = 14%).

However, MicroLender’s administrative costs for each US $100 loan will be much higher than 3 percent of the loan amount. Instead of US $3 per borrower, MicroLender is more likely to have to spend US $20 or more per borrower. Big Lender has to deal with only a single borrower, but MicroLender has to deal with 10,000 borrowers who typically do not have collateral, financial statements, or records in the database of a credit reporting bureau. Many of these clients may be illiterate. Lending to, and collecting from, such clients, requires time-consuming personal interaction.

Assuming Big Lender’s loan is repaid quarterly, it has to process four payment transactions per year. MicroLender’s borrowers probably make repayments monthly or even more frequently, generating at least 120,000 transactions per year. While Big Lender’s administrative cost is US $30,000 per year, that of MicroLender is at least US $200,000. Covering this cost requires a 20 percent charge on loaned amounts, resulting in an interest rate of at least 33 percent (10% + 1% + 20% = 33%). Note that administrative costs may be much higher in young MFIs that are too small to take advantage of economies of scale.”

It quickly becomes apparent that a considerable portion of the higher interest rate charged to borrowers by microlenders is derived from increased costs associated with the transaction. It is a simple fact of business that costs must be covered in order to continue operation. Further premiums must still be added to the interest rate to account for the many and varied risks assumed by a micro-lender. These factors will be explored in greater depth in a subsequent entry.

At this point, it is important to keep in mind that despite these high interest rates, micro-loans still provide positive marginal benefits for borrowers. Moreover, the potential to increase these benefits exists as the infrastructure of the industry grows, lowering costs. And finally, the high rates charged by microlenders are still considerably lower than those charged by informal sources, such as local money lenders. These important topics will also be examined in full in the coming days

Why do microcredit interest rates vary so dramatically around the world?

by Richard Rosenberg: Friday, June 20, 2008

The global average is about 35 percent, but the average in Mexico is above 60 percent and in Sri Lanka is below 20 percent. Small loan sizes are the most commonly cited reason why microcredit rates are higher than normal bank rates: microcredit is a “high-touch” business, and MFIs have to process thousands of tiny transactions. But here’s a graph of MFIs in 33 countries, showing pretty clearly that loan size by itself doesn’t explain the differences between their average interest rates.

We see several other dynamics at work:

• Operating costs can be pushed up by factors other than loan size, such as geographic dispersion of rural borrowers, or an unusually expensive labor market, both of which affect costs in Mexico. Age of the MFI is another factor. Surprisingly, scale doesn’t seem to make much difference: statistical analysis by the MIX shows that economies of scale tend to level off after the MFI gets its first 2,000 or so clients.
• Political pressure can make a difference. Some countries impose a legal cap on interest rates to keep them “affordable,” even though this may restrict the availability of microloans. In other countries (like Ethiopia), the government provides a lot of microfinance at very low rates, and MFIs feel political pressure to do the same.
• Management objectives differ. In countries like Bangladesh, managers felt that high interest rates were inconsistent with their social mission, and consequently set rates at levels that would produce very little profit, at least in the early years. In Latin America, many MFIs thought that attracting commercial capital was the best way to expand their social outreach, and wanted higher profits to attract such capital. We are now seeing players in microfinance—only a few so far—whose objective is profit, pure and simple: of course, such investors want interest income to be as high as possible.
• Competition gives borrowers choices, which puts downward pressure on interest rates, forcing MFIs to become less profitable and/or more efficient. This is clearly happening in some places—e.g., Bolivia, where interest rates have dropped from 60 percent in the early 1990s to about 17 percent now. But competition doesn’t produce this result everywhere: rates have not dropped very much in Bangladesh.

TASO (The AIDS Support Organization)

After a morning at the Foundation for Human Rights Initiative and a lunch of typical Ugandan fare at MUBS, we boarded Big Blue for TASO, The Aids Support Organization. The non-government organization was founded in 1987 by Christopher and Noerine Kaleeba with a mission to restore hope and improve the quality of life for those infected with HIV while also preventing further infections. From 16 founding members 23 years ago who met to support one another through fighting the disease and its stigma, TASO has blossomed into an organization with 11 centers like the one we visited today at Mulago.
The Drake and MUBS students came to visit on a ‘clinic day’ when about 200-250 clients come for care from either the counseling or the medical wings of TASO Mulago. In the medical wing, doctors primarily address administration of antiretroviral therapy (ART) and treatment of opportunistic infections like Kaposi’s sarcoma, tuberculosis, staph infections, thrush, and many other infections that a strong immune system can typically fight off. When an individual has HIV, however, the virus targets CD4+ T cells that are the central immune system activators; without them, patients cannot mount a proper immune response. Antiretroviral drugs are scarce in Uganda, as they are all over sub-Saharan Africa, so TASO follows WHO standards only administering ARVs when the CD4+ T cell count has dropped below 200µg/dL (350µg/dL for pregnant women) or the client has already fallen victim to opportunistic infections. All therapies are free for the clients. In the counseling wing, staff members work to encourage positive living, disease-state monitoring, goal-setting, and guidance. They also provide basic counseling for prevention, children, couples, families, loss, crisis, and support. Research for data, evidence, and donor accountability is also based out of the counseling department of TASO.
As we filed into the main building, there were many people waiting for their number to be called to receive services. We were informed that the organization serves 36,000 clients at Mulago. Six to eight percent of these are children aged 17 and younger. Of their client base, about 68% is female, and 32% is male. The presenter explained to the seminar’s students that the disproportionate nature of the service based on gender resulted from stigma; women have less of a choice about ‘coming out’ and are not as highly affected by the AIDS stigma as men.
After a brief informational presentation, students enjoyed a performance by TASO’s drama group, which was initially formed in 1992 and has turned into a center-wide project with professional training. Before singing their opening songs, Light and Hope and Trumpet Call, a spokesperson from the group explained their mission to spread the word about positive living, awareness, and eliminating stigma. He stressed that it’s important to realize that even if you’re HIV positive, you can do something positive. Smiling and full of energy, the groups sang their first two pieces in beautiful harmony demonstrating their talents and dedication to spreading the message to fight AIDS. It was very interesting to listen to how the singers included lyrics that encouraged actions to promote HIV awareness and detection, such as talking to a spouse and getting blood work done.
Gertrude, a member of the drama team, was then introduced to tell her story. She explained in candid and heartfelt detail how she had contracted HIV from a man who falsely promised to pay for her school and then proceeded to take advantage of her sexually. Her story was inspiring, though, as she explained how TASO helped her to rebound from losing her job because of stigma, reclaim her life with positive living, marry, and even have a healthy child of her own.
After Gertrude’s testimonial, the drama team performed several more musical numbers. One addressed AIDS stigma with solos from various members highlighting their traumatic experiences with stigmatization. One member sang about losing his friends, and another woman related in her native language her story about being kicked out of the home that she and her deceased husband had built. Another piece emphasized the power that comes with knowledge because even if you are HIV positive there’s still life to live and everybody will die at some time. The closing song had everybody clapping, and finally standing together, perhaps symbolizing us all standing against AIDS. After the music finished, the group members each introduced themselves and stated the year they were diagnosed. Some were diagnosed and joined TASO as early as 1990, 14 years before antiretroviral drugs (ARVs) were introduced to Africa. One man diagnosed in 1995 was even able to boast a CD4+ Tcell count of 1,119µg/dL without ARVs, showing the effectiveness of TASO’s ‘positive living” method which encourages eating healthy foods, taking medications, no smoking/drinking/drug use, mild exercise, acceptance, socialization, not blaming others, not feeling guilty, avoiding depression, and basically leading a normal, healthy life.
After the group closed their performance, students were allowed to ask questions and browse the jewelry and crafts that were made my clients of TASO and for sale to benefit the organization. The afternoon’s performance and messages, hopefully inspired students to consider the possibility of TASO’s vision coming true, the possibility of a world without AIDS.
Perhaps as you consider whether or not TASO’s vision is realistic, you can consider other questions regarding their organization and HIV/AIDS in Africa. How were you touched by the music of the drama group? Did Gertrude’s story inspire you? Were you surprised by the appearance of those with HIV/AIDS? Do you think stereotyping and stigmatizing is an issue in the United States because of our expectation of what they would look and act like? What do you recognize at the biggest challenge to fighting AIDS in Uganda? Do you think stigma is still a major factor affecting an HIV-positive individual in Uganda? If so, what did you recognize TASO doing to combat stigma? If not, what do you recognize as factors that are helping to reduce stigmatization?