Staff Writer | Palladium - May 02 2019
"Becoming a Bank is a Means to an End": The Transformation of BRAC Uganda

A smallholder farmer in Uganda opens the box where he keeps his savings. Credit: Allison Shelley for CGAP 

Roughly 74 percent of the population in Uganda lives in sparsely populated rural areas with minimal access to financial services. Smallholder farming families are often excluded from the formal economy, leaving them at risk of falling victim to fraud through fake financial institutions, and unable to get credit to grow their businesses and create jobs.

Since 2006, the world’s largest development organisation, BRAC, has been providing a range of financial services to Ugandans, particularly for women in rural and low-income communities. “Poor rural women, who are our primary customers, really want savings and deposits,” BRAC’s Shameran Abed told ImpactAlpha. “Sometimes the people they’re saving from are the male members of their families.”

Now, BRAC can meet this need, as the NGO has just transformed its microfinance operation into a bank – BRAC Uganda Bank Limited – allowing it to offer savings accounts, money transfers, insurance, and other financial services besides credit products to Ugandans.

BRAC Uganda already serves over 200,000 clients, with 163 branches in 84 districts of the country, and about $50 million in outstanding loans. This transformation will broaden and deepen financial inclusion for hundreds of thousands more.

“A Journey Where Execution Meets Passion”

To meet the regulatory requirements of transforming the biggest microfinance operation in Uganda into a Tier 2 Credit Institution, BRAC has diluted its 100% shareholding, selling 17% each to three investors.

The new equity partners include DEG, a German development finance institution; Equator Capital Partners, an experienced fund manager investing in financial inclusion; and Triple Jump, a Dutch impact-focused investment manager.

This deal was made possible by Enclude, Palladium’s Capital Advisory business and long-time partner to BRAC, who acted as sole financial advisor.

“Our close partnership has enabled us to tailor the transaction process and select the right partners for BRAC,” said Enclude Director Alistair Mackie.

“Becoming a bank is not the end in itself, but a means to an end,” continued Abed, who serves as Senior Director of BRAC’s Microfinance and Ultra-Poor Graduation programme. “We are now in a stronger position to not only provide far greater value to the hundreds of thousands of clients that we already serve but to achieve greater financial inclusion in Uganda by serving more who are outside of the formal financial system.”

BRAC International plans to use the proceeds of the sale to further expand its operations in other countries with low levels of access to finance.

Enclude is Palladium’s capital advisory business, offering investment banking services for businesses that are seeking to make a positive social or environmental impact. These services include capital raising, advising on capital structures and growth strategies aligned with impact goals, designing new investment products, managing responsible exits for investors, and transaction-related services.