The swarms of motorcycle taxis navigating traffic jams, beeping, and hawking for custom is a firm feature of Uganda’s urban life.
It looks chaotic but it’s part of a sophisticated system. A “stage”, the meeting place where drivers wait for passengers, is “always organised”, explains Manishul Lwanga, a field officer at social enterprise Tugende’s Mbarara branch in western Uganda. “So you have chairman, vice-chairman, security … you cannot operate if you don’t belong to a stage.”
Tugende is a social enterprise that provides affordable loans so drivers can buy their own motorcycle. It draws on the tight-knit stage communities to screen potential borrowers. Without credit histories or collateral, credit-worthiness relies largely on references from a driver’s chairman or colleagues, and sometimes also his mother.
Path to ownership
Boda drivers, as they’re known, don’t have the best reputation. At worst associated with crime and reckless driving, at best, sustaining a dangerous mode of transport. Yet they do much to keep congested cities moving and provide vital transport links in rural areas. Customer demand provides a living for an estimated 400,000 drivers in Uganda, though most of them rent their bikes without a contract.
By contrast, Tugende’s rent-to-own scheme offers security and the chance to increase earnings. Drivers make weekly repayments for up to 19 months at around 15-20% more than the market rental rate. To date, over 600 drivers have fully paid off a loan and 85% of payments have been made on time.
Tugende’s customers include the occasional university graduate and the only female driver in Kampala; typically, though, they are 18-35 year-old men with no secondary education. Most support several relatives in their home village, alongside their immediate household. About half have a bank account, according to Tugende, but none can access the finance they’d need to purchase a motorcycle. Even microfinance loans would require collateral and a deposit of 20-40% (Tugende’s is 8.5%).
Besides boosting incomes, the path to ownership encourages more responsible driving, says Michael Wilkerson, Tugende’s CEO and co-founder. “You don’t have to swerve and make crazy decisions and get one or two extra passengers that day if you know you’re going to own that motorcycle - and if your daily or weekly payment is affordable.”
Violent robbery, rather than traffic accidents, are the biggest danger. Stolen motorcycles are easily resold. On the roads, there’s little Tugende can do to protect its clients from thieves or reckless drivers. They do provide helmets, however, and personal security is part of the mandatory three-week training all loan applicants must complete.
Growing trust, and demand
American-born Wilkerson met scepticism in 2009 when, working in Uganda as a journalist, he started lending his own money to three drivers. But his trust is starting to rub off on others.
“We’ve been talking to insurance companies for years and they’ve slowly come around to the idea that maybe this industry isn’t as risky as they thought”. Since last August, every lease issued by Tugende includes life, disability and emergency medical coverage - not insignificant in a country where insurance penetration is less than 1%.
Demand for loans has grown and grown, all through word of mouth. Some 500 drivers are currently waiting for bikes; another 1000 post-training applicants are scheduled to be vetted by the team. Tugende expects to have over 15,000 customers by the end of 2017.
There’s potential for even greater reach, though. Tugende is piloting a new model in other parts of Uganda with support from the UK-based charity Shell Foundation, and is also looking at Rwanda, Kenya and Tanzania. (Kenya alone has an estimated 500,000 bodas on its roads).
Ultimately, says Wilkerson, Tugende’s aim is “about helping entrepreneurs who are already hustling to get to the next level.” It’s a model he sees working just as well for other income-generating assets such as sewing machines, welding equipment, dairy cows - anything that brings in a predictable cash flow.
How will Tugende fund their own expansion? To date, financing has come from both commercial and philanthropic investors, including the Segal Family Foundation, Echoing Green and others. Today, with 37 staff, the company is breaking even and aims to raise $12m (£8.5m) over the next two years for 15,000 new motorbikes.
Some potential investors think the model is too high-touch to scale up effectively, but Wilkerson says closeness to the customer is precisely what makes it work. One of Tugende’s core values is empathy, which means a bias towards approving loan applications, leniency on late payments (perhaps calling up the stage chairman to find a solution), and allowing those who default to reapply after six months.
The impact investment industry may have been crucial to Tugende’s early growth, says the CEO, but - frustrated by what he describes as the inherent risk-averseness of many in that space - Tugende is looking increasingly to purely commercial investors. “They care about impact, but care much more about building a large, self-sustaining business first, and filling out impact reports second.”
Ultimately, says Wilkerson, levels of customer satisfaction and demand are the primary measure of success.
Content on this page is paid for and provided by the British Council, sponsor of the international social enterprise hub
