Modern banking institutions would greatly improve the effectiveness of microlending.

Question: How will your company affect Africa’s microfinance industry? 

Michael Landau: Microfinance has not been widely recognized by the world as being a major stimulant for local economies in developing countries.  Muhammed Yunus with the Grameen has proven in Bangladesh and other places that when you give people small amounts of money, they can, now, take that. So they can, instead of having...

I’ll use the goat example. Instead of having one little goat, they can borrow a little bit of money and get the two goats, produce the third and fourth and fifth goat. And now, they’ve got money that they can, now, go and buy more fertilizer and grow more oranges or more mangoes. And it creates a multiplier effect in the rural areas. These people have also demonstrated that there’s a good repayment, very strong repayment rate for these people who borrow the microfinance. 

The challenge of a microfinance in a country like Uganda and many other countries is, Uganda, according to the statistics that we have, which, again, I’m not going to vouch for the veracity and the authenticity of the statistics, but there’s roughly 400,000 loans, microfinance loans in Uganda, which is a percentage of the 32 million plus people that live in Uganda is a minuscule amount considering that the majority, the vast majority of the country, you know, kind of live in poverty. 

So it’s a shame that there aren’t more. The question is why are there not more microfinance loans. In addition, they don’t know how many unique people have those 400,000 loans, was it somebody who is clever enough to get 10 loans, 15 loans using different identities or going to different banks. So that’s another one of the challenges. And generally, the challenges of microfinance are how to get the money to the people, how do people apply for the money, and how do people repay the loans in an efficient manner. If you get a hundred dollar loan and you need to repay 10 dollars a month, to go, to travel to the nearest payment center, which can be, you know, quite far away, can sometimes cost you 10 dollars just to go and travel. The two days it takes you to get there and your opportunity cost of not working, and then the fact that when you are traveling, people know you’re traveling with cash.  So there’s tremendous inefficiencies in the whole overall system. That was actually one of the requests that the government had of us in terms of creating a solution that we were able to help build the microfinance industry in the country. 

Question: Will MAP make microloans? 

Michael Landau: There’s no shortage of money to be lent in the microfinance environment. The government themselves have got a lot of money available. IGOs, Intergovernmental agencies, have got money available to be able to give individuals the loans. And private sector have got a lot of money available. It’s a very good business to give microfinance loans to people who work. And there’s a very a good statistics that people repay these loans. 

What our system does is it allows people to be identified so now they become part of a formal sector that people will know who they are. And that with the one fingerprint, we can double check to see, you know, how many times have they taken loans out before, have they taken out loan before in a different name?

So that’s level number one. So we can identify them when they have one of our cards. We can now, we can now facilitate. And we’re enablers. We are not looking to be in the microfinance business. We are an enabler for the microfinance entities, whether it’s the banks or the governments, the NGOs, or IGOs. But we will, now, be able to facilitate the providing of a bank card. If you don’t mind, I’ll just whip out, you know, kind of a copy of a card. I mean, this is, this is an old card but this is a card that, now, is the card that we provide to the people when they get identified, you know, with the mag strip.  And so, now, they, we know who they are.  And that card, now, is, we can, the bank that’s going to lend them the money or the IGO will now be able to give the hundred dollar loan directly to that person. So first of all, you know that the person receive their money and they received a 100 percent of their money.

Now, when it comes to, so now, you’re able to get to a much larger crowd of people who can, you know, large number of the population are now be eligible to get a loan. Now, the question is how do they repay the loan? Well, part of the MAP system is to be able to provide point-of-sale machines, which are going to be distributed all over the country so that the people can, and the point-of-sale machines are going to be in the banks, in the post offices. They’re going to be in all these SACOS. Many of the agents, we’re going to have many agents around the country who currently sell at air time, they’re going to be our agents also. 

So you’ll be able to go the same place where you buy your air time. You’ll be able to go to those people and repay your loan. So you don’t need to walk for two days to be able to repay your loan.  You don’t have to wait until you have 20 or 30 dollars. And you’ve collected enough money that it’s worthwhile. As you have a little bit of money, you’ll be able to pay down your loan. So it becomes much, much more efficient for people to be able to pay down their loan. 

So from a holistic perspective, you know, the MAP solution is one that will enable the good effects of the microfinance, which is that it becomes a major stimulant and the growth multiplier in the economy. We are now enabling many, many more people, exponentially more people, to be able to become part of this very strong economic driver of growth in developing countries.

Recorded on: May 15, 2009