Presentation Fin4Ag S15 by Josephine Mukumbya

1. GUARANTEE SCHEME
EXPERIENCE AT aBi Finance
Limited IN UGANDA
JULY 2014

2. Background- aBiTrust
aBiTrust(Agricultural Business InitiativeTrust)
was jointly founded by the Governments of
Uganda and Denmark in 2010 with a multi-
donor backing.
Objective-To strengthen the competitiveness
of Uganda’s agricultural and agro-processing
sector.

3. Background- aBi Finance
aBi Finance Limited (formerly called
Agribusiness Loan Guarantee Company)
investment arm of aBi Trust that
financing for agribusiness development
more commercial manner.
Focuses on risk management and
investment to ensure sustainability of
Trust.

4. aBi Finance Products
i. Lines of Credit for on lending to
Agribusinesses
ii. Guarantee Schemes (the Agribusiness
Loan and Construction Guarantee
Schemes)
iii. Fund Management
aBi Finance basically supports Financial
Institutions to reach the ultimate
agribusiness beneficiaries.
This presentation shall focus on Guarantee
Schemes, particularly the ALGS.

5. Basic Guarantee Features- Construction
Guarantee Scheme
CrossRoads (DFID project) partnered with aBi to deliver the
ConstructionGuarantee Scheme because:
i. Already had relationships with a range of FIs;
ii. Demonstrated reliability and experience in managing funds from
several development partners;
iii. Exhibited strong governance;
iv. Had a mission consistent with the objectives of the CGF.
Covers - Bid, Performance Bonds & Advance Payment
Guarantees (50% of loss -principal outstanding only)
True Risk Sharing between FI & aBi Finance
Summarily operate scheme according to the Guarantees
operations manual used for ALG, with a few exceptions which
are highlighted.

6. Basic Guarantee Features-
Agribusiness SMEs
Agricultural Sector and support structures -
Businesses at any stage of the value
chain from Input supply to Production
to Retailer’s shelf.
SME’s with a maximum of:
50 staff;
USD $ 300,000 Balance Sheet Size;
USD $ 400,000 Annual sales turnover
Any two (2) of the above three (3) qualifies
Maximum Facility USD $200,000 (Up to USD
$ 1Million exceptionally).

7. GuaranteeTerms
Cover for up to 50% of principle outstanding.
Maximum total amount granted to FIs
determined by application and due diligence.
Maximum tenure of Guarantee – same applies
True Risk Sharing by Guaranteed party – At any
point in time, risk is shared between the FI & aBi
Finance.
No rescheduling of loans without notification.
Utilization Fee ranging between 0.75%- 1% per
annum of the Guarantee limit.

8. Eligibility Criteria
Applicant must be an FI legally registered in
Uganda across variousTiers;
Must have at least 3% of its loan portfolio in
Agribusiness lending;
Have a branch network outside City (Kampala);
Should be able to present 3 years audited
Financial Statements for DD;
Must comply with regulatory financial
covenants.

9. Innovative approaches of aBi
1. The ownership and governance set up
allows more flexibility of operation and
accountability to stakeholders.
2. Coexistence with aBi Trust, which
addresses specific gaps identified during
FI due diligence, throughTA.
3. Focus on commercial viability and
sustainability through fund
management.
4. Other products offered enhance the
relationships with FIs.
5. Partnership with like minded
organizations.

10. Statistics
Value of New Guarantees granted since
2010-2013 - USD 63M
Number of New Guarantees granted since
2010-2013 - 63,026
Leverage as at 31st December 2013 – 99%
Claims payout ratio 2010-2013 – 0.4%
AverageYield on investment (2010-2013)-
13.62%
Fees charged on Guarantee limit and not
utilization – 0.75%-1%.

11. Statistics
Subsectors served – Coffee, Bananas,
Maize, Sugarcane, Oilseeds, Horticulture,
Dairy, Beef, Poultry, Pulses and Cereals, as
well as support services like transporters,
veterinary services.
Number of FIs on scheme grew from 5 in
2010 to 12 in 2013 whose clients are
representative of actors in each part of the
value chain.
1 Development Bank, 8 are Commercial
Banks, 2 are Credit Institutions and 2 are
Microfinances.

12. aBi Finance ImpactAssessment 2010-2013
aBi Finance was taken over by aBi Trust to achieve the
following targets:
i. Double agriculture’s share of the participating
FI’s loan portfolio;
ii. Increase term lending to SME agribusinesses
threefold;
iii. Create an efficiently run loan guarantee
company where the loss rate is within
international good practice; and
iv. Create Employment.
An impact assessment was conducted end of 2013 to
ascertain whether the above were achieved.

13. Impact Assessment Objectives
To evaluate the performance of aBi Finance over the
period (Sept. 2010 to Sept. 2013) to determine the
extent to which intended goals have been achieved;
To recommend corrective or other measures that
may be deemed necessary to achieve the main
objectives.
Levels of Evaluation
1. Participating Financial Institution (FI)
2. Beneficiary or Bank Clients in specific enterprises

14. RATIONALE FOR SAMPLING
• FIs that had implemented the programs for a
long-enough period to create measurable
impact.
• Selected FIs provided details of their loan
beneficiaries, including the enterprises they
engaged in.
• Enterprises with the highest number of
beneficiaries were selected, to ensure
sufficiently large numbers for meaningful
statistical analysis and control to make
comparisons.

15. Intervention
Start
Time
Change
with intervention
Impact
without intervention
Intervention
End
Total change
Methodology: Difference in Difference
15

16. Study Findings at FI level.
i. Continued growth in the Agribusiness loan
portfolio which came above industry average for
the sampled FIs.
ii. More attention to promotion of agribusiness
lending within FIs- e.g. tailor made Agribusiness
loan products, Agricultural lending units….
iii. NPAs at half of branch level averages to help
increase appetite for Agribusiness lending.
iv. 63,026 new agribusiness loans were under
written.
Examples in next two slides

17. ABC Bank Portfolio status (Billions of USh)
55 69 88 100 114
355
406
527
571
682
0
100
200
300
400
500
600
700
800
2009 2010 2011 2012 2013
Agriculture Loans
Total Loans

18. XYZ’s Portfolio status (Billions of USh)
0.10
4.49
29.83
63.622
0%
1%
2%
3%
4%
5%
6%
7%
8%
-
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2010 2014
Agriculture Loans Total Loans % of Agric Loans

19. • Increase in volume and value of loans accessed from
2010 to 2013.
• No. of new FTE jobs on sampled beneficiaries indicated
that each beneficiary created two jobs. (approx.
120,000).
• Average income growth was reported at an average of
$3,000 across the sampled enterprises.
• There was a demonstrated increase in net asset
holdings in land, livestock, equipment.
• Perception on borrowing for agriculture improved since
the loans helped them earn some profits from their
farms.
Study Findings at beneficiary level.

20. No. of FTEs Jobs Created in various enterprises
101.88
62.43
56.25
45.5
3741.25
1.52 4.5
8.125 12.125
0
20
40
60
80
100
120
Treatment
Control

21. Concerns highlighted by Study & Resolutions
Paucity of technical skills in agriculture lending and operation of
Guarantee schemes especially at Branch level.
Continue collaboration with aBi Trust to direct their grants to
specific partners that are still challenged in this regard.
Disseminate the sensitization sessions we offer to the Branches.
Gender imbalance in favour of men exhibited.
Continue collaborations with institutions that are keen on
financing women and youth Agribusiness projects as had been
done in the past to reduce imbalance.
Lower portions of the sampled enterprises which suffered pest
attacks felt agricultural lending was beneficial, underscoring the
need to avail affordable crop insurance services.
Continue collaboration with other partners to stimulate increase
in use of insurance product in order to bring the overall cost down
and maintain confidence of beneficiaries to borrow.

22. Concerns highlighted by Study & Resolutions
Need to expand geographical coverage –Northern Uganda
Already included in strategic objectives of aBi Finance and FIs with
Northern Uganda expansion programs targeted going forward.
MIS challenges affecting reporting timelines and quality
Automation at aBi Finance level as well as sensitization of partners
has and continues to improve this.
Perceived high fees by FIs
Have taken time to articulate to them how the fees are arrived at
and usually consider a slight decrease if the limit is above $4M.
Leverage
Portion of the fund to back Guarantee, has since been reduced
and dedicated to Lines of Credit.

23. Plans for scaling
1. For financial inclusion, bring on board some of the
smaller institutions (Tier IV) to whom TA has been
provided by the Trust over the past three years.
2. Support addressing of MIS challenges which
become more apparent as more volumes are dealt
in.
3. Business plan intention to inject new capital once
key targets like leverage ratio are met in 2014.
4. Focus on more financially excluded groups.
5. Introduce other products.
6. Introduction of mechanisms to promote socially
responsible investments.

24. THANK YOU