Most of CML’s clients are small business owners who do not have in place a system for financial management. Typically they do not keep written records of sales and expenses. Thus, they have no financial statements that can tell them how their business is doing. The staff at CML realized that, both from the lenders and the business owners perspective, there was a need for better financial information. Together with Steven Kaweesa, one of CML’s clients that teaches book keeping at his vocational school, they invented a record keeping system aimed for small scale business owners with limited knowledge about financial management.

Introducing book keeping in an environment where few people have access to computers and even fewer have the necessary knowledge for using them for a business purpose is a tough challenge.

Introducing book keeping in an environment where few people have access to computers and even fewer have the necessary knowledge for using them for a business purpose is a tough challenge. Some of CML’s clients have spent very few (if any) years in school and have only basic literacy. Furthermore, business owners have to be convinced that time spent on book keeping is well invested and will provide them with higher incomes in a not too distant future. The record system therefore had to be very easy to use for the business owner themselves.

So far, the record keeping system has been implemented for 80 small business owners and the ambition is that all of CMLs borrowers should use the system by end of 2017. Introducing record keeping is a unique feature for CML and once the system is implemented for all clients, CML would have a clear competitive advantage compared to similar micro finance companies. Furthermore, the business owners can act as important sources of knowledge in their neighborhoods once they received their training from CML. Since financial knowledge is scarce, this multiplies the social impact. In addition, the increased demand for business services that will follow a more extensive use of record keeping will create new employment opportunities in data entry and accounting services. As youth unemployment also among university graduates is one of the major problems that Uganda currently faces, the large scale use of record keeping that CML aims for can contribute to development and increased prosperity in Uganda.

In the long run, increased use of record keeping among small business owners has the potential of changing the foundations of the micro finance industry by making lending less risky and thus open up for lower interests rates and greater outreach.

How does it work?

The book keeping system consists of a pre-formatted book designed to enable persons with very diverse education backgrounds to keep track of financial details. Each page in the book contains one day of sales and costs. Initially, CML staff explain record keeping to the borrowers in tutorials at their place of business, showing them how to use the book. CML staff then make follow up visits to the business, making sure that directions are followed such that accurate financial records are preserved.

Once a three-month period is complete, the hand written records are put into a computerized format using the Quick books program. The result is an income statements that show profits and losses (for most businesses, balance sheets are too difficult to produce as the value of the business assets are difficult to estimate correctly). This work is done by trained computer workers. Initially, these workers are paid by CML but subsequently the businesses owners themselves cover the full costs. CML staff then follows up to explain the financial results to the business owners. These follow up sessions are important opportunities to learn for the business owners. Often, these sessions results in important insights on how to improve the business.

How the Record Keeping System benefits CML

Loans to small businesses in Uganda are typically made without much financial information. Lenders have to assess the character of the owner, eyeball the business premises and the owner’s home environment, and judge intuitively on the borrower’s credit worthiness. CML staff have the experience to make these judgments. However, that takes time and expertise, and loan decisions always benefit from analysis of past business performance.

The Record Keeping System enables CML to quickly see which borrowers are following the program. The staff can examine the income statements and analyze business performance and debt repaying capacity. As a result, the opportunity to detect repayment problems at an early stage is significantly increased. In addition, it is easy for CML’s staff to analyze problems in the business and suggest solutions. In the future, book keeping will be introduced to potential clients six months before the loan is disbursed which will further reduce the risk of defaults as well as lower the costs related to the loan appraisal.

To conclude, CML’s excellent portfolio performance can to a substantial extent be explained by the book keeping system. In the future, the increased usage of the system is also expected to lower operational costs.

How the Record Keeping System benefits businesses owners

Without good financial records, small businesses cannot have an accurate understanding of their business’ performance. With accurate data and training in financial management, a new world of opportunities opens up to the business owner. The record keeping system and the supplementary training explains the importance of separating household economy from business results and enable comparisons to be made between different periods such that important trends can be detected. Furthermore, the system facilitates profitability analysis of different business lines and open up for evaluation of operational changes.

One third of CML’s borrowers that have had their records computerized opt to continue and also pay for the service after the loan period is finished.

Initially, many business owners are skeptical towards book keeping fearing that it will consume too much of their time. After seeing the benefits with the system, most however change their mind. In fact, one third of CML’s borrowers that have had their records computerized opt to continue and also pay for the service after the loan period is finished. To meet the demand, CML has started a consulting company; Think Big Consult. This company help earlier clients to CML and others with book keeping, financial analysis and other business related problems.

A vision for the future

Even if the record keeping system currently is unique for CML and something that make them stand out from similar businesses, CML wish to inspire other micro lenders to implement similar systems. At the first glance, record keeping might seem difficult and time demanding and it is easy for small scale business owner to say “nobody else do this, so why should I”. When combined with micro finance, the business owner get an incentive to start – no record keeping means no loan.

CML have discussed with the Ministry of Gender to roll out the record keeping system for the youth that is involved in a government program called the Youth Livelihood funds. Currently, CML is awaiting the signing of an MOU which will grant the capacity to work with 10 districts offering the service of record keeping.

Large scale implementation of record keeping will create a large number of administrative jobs and that is exactly what Uganda need to tackle youth employment. Taking the example of Nansana town council where CML operate as an example, the records from the revenue collection department show that there are over 2,000 small businesses in the area. According to CMLs research, over 95% of them do not keep records. If we assume that all of them where to start record keeping and buy the service of processing their data, and further assume that one person can manage to handle data for 20 small business owners, this means that about 100 new jobs will be created. This is quite much in an area with a population of around 500,000 which about 100,000 are unemployed youth.


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