This is the latest in my series of posts spotlighting underrepresented communities around the world and the entrepreneurs trying to help them. In this installment, I talk to the founders of a Ugandan company that's helping local entrepreneurs run their businesses better and find the investment they need to survive.
One of the biggest hurdles any entrepreneur faces is access to working capital. Great ideas are just a start; there also has to be a way to make those ideas a reality. Some of the companies that have the potential to be very successful are held back because they don't have the cash or the capital to buy in bulk or do other things that could quickly increase their profits.
The problem is even worse in Africa, where if companies don't have assets or enough of a profit margin, loans that go beyond a couple hundred dollars aren't always accessible. There are thousands of small companies facing this issue there. However, an innovative company called Numida Technologies is working to change that.
Building the Case for Funding Small African Businesses
Numida's product TrackApp, is an application designed to help solve some of these issues and pave the way for small businesses in Africa to get their financial needs met in more ways than one. From tracking expenditures and debts, to laying out more than just financial data for lenders to see, this app could open the doorway for small businesses to have access to the funds they need at competitive rates they can afford.
"There are 22 million African small businesses that are held back by the high cost and inaccessibility of credit," says Numida co-CEO Catherine Denis. "The goal is both to help them make better decisions with their financial records but also to demonstrate their credit worthiness."
Denis estimates there are around 300 thousand small and medium businesses in Uganda alone that are struggling to gain access to funds. She says such businesses are highly important to growing economies since they generate 80% of new jobs and 90% of the production in the private sector.
With TrackApp, small business owners and potential owners can track every element of their finances. They can spot, analyze and correct bottlenecks, overspending, and gaps that need to be filled in. They can figure out what to sell and when. This information helps make profit margins bigger, and leaves room for cost reduction in many areas.
On top of that, it opens the door so entrepreneurs can go beyond microlenders who can only provide a couple hundred dollars at very high interest rates.
"That type of loan is not sufficient for a small business looking to invest in growing their business," Denis says. "Our bet here, and we are highly confident in this, is that capturing the cash flow information and the performance of the business will help us to make credit decisions and to be able to offer larger loans confidently once we have the financial performance data about businesses."
Denis and her co-CEO Mina Shahid opened their first office in Kampala, Uganda in March of 2016. They're hoping to eventually move beyond Uganda, as well as unlock funding to companies that need bigger loans than most microlending competitors provide.
Helping Entrepreneurs in a Tough Business Environment
It's an understatement to say that it is difficult for most entrepreneurs to make it in a tough business environment. Numida Co-Founder Mina Shahid described one entrepreneur, a small detergent manufacturer, who has been helped by the app.
"His name is Shafique Semakula. He's super ambitious, he's a young entrepreneur, he has big dreams, and he's had some bad experiences in the past when trying to access working capital to essentially buy raw materials," says Shahid. "His business almost collapsed because of school fees this year. He essentially had to choose between buying the raw materials to turn into a finished product to earn income, or to pay the school fees for his two daughters. This is a reality that several of our users are facing where they have to make trade-offs that often hinder the development of their business because they cannot access financing or any kind of affordable business credit."
Shahid says that Semakula has been using TrackApp for 7 months and it has helped him crunch the numbers and make stronger business decisions. Such decisions may hopefully convince lenders that he is a safe bet for long term investment. TrackApp takes usage data, financial histories and cash flows, and shares this with local lenders in Uganda who want to lend to small businesses. It will soon let entrepreneurs apply for credit directly through the app. The goal is to find a funding match, so that Semakula will never have to choose between the health of his company or his family again.
If you like stories about entrepreneurs helping out underserved communities, check out some of the other stories in the series. Meet the the entrepreneur trying to solve homelessness one person at a time. Or, meet one of the first Latina CEOs to interview at YCombinator, and how she's looking to curb workplace bias.