18/08/2021
BE INSPIRED
BANKS REFUSED TO LEND BITATURE, HE ENDED UP OWNING A BANK!
I faced it rough during those years when I was trying to begin a business and I needed a lot of money. Every bank I went to, trying to borrow, turned me down. When you are starting, banks can humiliate you. The questions they ask you can make you feel like you are un******ng yourself before them. They make you run up and down and do many things with hope, only for them to tell you, โWe are not giving you that money.โ I was offended. Because of that experience, I I decided that one day I would own a bank. That is how I began a microfinance, which eventually turned into a bank.
Another reason I began the CMF (Credit Micro-Finance) was that I used to lend money to many people but some couldnโt pay it back. In my heart I was trying to help them, but for some people, once you are succeeding, they look at you like you are the local MP (Member of Parliament) who should solve everyoneโs problems. Wherever I went โ in Ibanda, Kampala, everywhere โ people expected me to financially help them. In our society, the stronger will protect the weaker; thatโs how we were raised. Itโs a social fabric; a safety net. So as soon as you seem to be getting a little bit stronger, all the weak around you expect you to protect them and then you all become weak.
If you must borrow, donโt stake your only security โ such as your home โ as collateral. Also note that I donโt encourage you to borrow if it is your first time in business. I say begin by saving. Save and begin small. Too often we borrow because we want to begin too big and too ambitious. If you start big, you will fall. You will lose money however good you are. Itโs very difficult for you to instantly take off and fly the first time. Even most planes first run on the ground to first gain speed, momentum, and then take off slowly. A helicopter is beautiful; it just takes off without having to first run. But it has to first gain propulsion power on the upper propeller before it can get off the ground. And thatโs the hardest part.
Please begin slowly and master the art. Along the way, you are certainly going to make mistakes. Donโt feel bad about your mistakes. I have learnt much more from mistakes than from success. I sometimes donโt even remember what made me successful in certain instances. But all the key mistakes Iโve made are documented because they are important to me. I wouldnโt wish to repeat them. Neither would I wish to see my children or my managers fall in the same pits I once fell. However, I sometimes allow them to make mistakes and crash into the wall in order to learn a lesson they couldnโt have learnt in any other way. For instance, they may ask me to approve a budget to do a certain promotion when I very well know that their strategy wonโt yield results. But because I know they wonโt understand the gravity of the mistake unless I signed it off, I give them the money and they lose it. They never repeat the mistake because theyโve learnt their lesson. Because I greatly learn from mistakes, I put mine on the asset side of my balance sheet, not on the liability side. A mistake is not a liability, except when you donโt learn from it.
When you are looking for capital to start, keep your business model simple. When I had just begun the microfinance, I was touched by a lady who I will tell you quickly about โ Mama Jessica. She was a born again girl. At the age of 16, she came from Rakai after her parents died. Her relatives in Kampala didnโt have any money or any other beneficial thing to help her with. The only thing they saw of value in her was her body. So they encouraged her to join prostitution. โYou are brown,โ they said, โin Kampala youโll get a premium.โ
Her virtues could not allow her to get involved in such an immoral lifestyle. That idea was not compatible with her faith. She came to a pal of mine, a Muzungu (Whiteman) from Denmark and she made her case. That Muzungu was my business partner and so he brought her to us in the boardroom. We were just beginning the microfinance. She had no security โ nothing whatsoever to guarantee that she would pay back the money. At that time we were lending only to groups. But she begged us to give her a chance. We decided to take the risk and use her as a pilot scheme.
โOkay, what do you want to do?โ I inquired.
โI only know one thing โ to make chapatti,โ she responded.
โWhatโs so special about your chapattis?โ
โIn Rakai people love my chapattis so much. You give me a sigiri and see. Give me money to make my chapatti.โ That was all she could say.
Now, this muzungu was touched. He insisted that in addition to loaning her the capital she needed for her business, we also give her money for accommodation so that she would not have to go back to her relatives. So we made a business plan for her; she couldnโt make one for herself. She wanted a sigiri (charcoal stove), charcoal, a saucepan, cooking oil and flour. Of course, when you make chapatti, you might need some things (ebigenderako) like beans. Those days Rolex (fried eggs rolled in a chappati) hadnโt become popular yet.
We worked it out and her total capital for the requirements was 220,000 Shillings. We were lending money at an interest rate of 3% per month. That was a lot of money. But we built it in her business plan and we allowed her to start selling outside our Owino CMF branch.
The first day Mama Jessica started selling her chapattis, the aroma would just bring everybody in the vicinity. Her chapattis were different. She was successful at her game. We supported her for one month. The second month, she was able to pay her loan independently. Why? Because with her chapatti she could use 70,000 Shillings as working capital and make 30,000 Shillings everyday. She worked 25 days a month and made 750,000 Shillings. Regardless of the interest, she could pay us comfortably.
In one month of selling her chapattis, she cleared her house rent and also paid herself. Her target per day was to make 30,000 Shillings. That was the formula in her head. Her business grew and she started hiring workers. She didnโt care if they made more money; all she wanted was her 30,000 Shillings per day. As I speak now, she has a restaurant in Owino.
From a very simple business idea, Mama Jessica has become a successful woman. She didnโt need rocket science. So when someone tells me, โIโve totally failed in business,โ I feel itโs because he or she has not humbled himself or herself to go to the beginnings; to the basics. A basic model of 200,000 Shillings can grow a business to a point where you can earn a million Shillings every month as profit.
There are women in Kikuubo who are very rich. One of them lives in Kololo. She imports textiles from China and makes one Dollar per metre of cloth. Women buy her stock a lot, especially towards the end of the year. When her stock arrives, she sits in her shop and watches as they open the container. She knows how many metres she bought. Her relatives are educated so they deal with the issues of taxes and prices. All she wants is her one Dollar on each metre.
Her target has been to make a million Dollars every year. She began with one container, then 2, and 3. She now brings 900,000 metres of cloth and she expects 900,000 Dollars as her profit. If you are her employee, she doesnโt care how you convince the customers to pay; all she will ask you at the end of each day is: โHow many metres have you sold and where is my money? Her capital is always the same. She takes out only her one Dollar for each of the metres sold.
Her formula has worked for her and she will not change it whether she buys a metre at 7 Dollars or at one Dollar. On each metre she just wants one Dollar. She doesnโt want her business to get complicated. She doesnโt want to hear about percentages, capital investment, return on investment and so on. One Dollar per metre is what she knows. She now lives in Kololo in a house of a million Dollars. Every year, she is buying a building in Kikuubo and her business is still growing.
Whether you use your savings or borrow to start a business, keep it simple. You can do it. Donโt despair. Some people will cry, โOh if I borrow from a bank they are going to charge me 20 or 30% percent interest per annum.โ If you divide that to the months in a year, you will find you can pay it. Any business in Uganda can make 30 or 40% profit. A restaurant business makes 30 or 50% on food every day. So tell me why you are scared of borrowing.
As long as you are rational and disciplined, you can borrow and pay back. Just make sure you donโt divert the money to other things. Remember, once you have got the discipline, you will even begin to qualify to borrow bigger amounts. That is how the banking system works. Borrowing is a function of how you run your account. Itโs an automatic function. They look at the numbers and they can say they will lend you and the decision goes up. Then you can keep borrowing more and more.
I should mention that capital is the last thing that should worry you if you are determined. Never tell me that you failed to raise capital. If you have that determination to walk from Kampala to Entebbe for your one million Dollars that I talked about, with a single-minded focus like that of a sniper, you cannot fail to raise capital. And you donโt need a lot. The formula is to learn how to make 20,000 Shillings become 40,000, then you begin to turn 40,000 Shillings into 80,000 and soon you will find it has grown to 1m.
Begin in that simple manner and keep your formula right. If you are given 10 million Shillings before you can gain the ability to grow 10,000 Shillings, you will squander it. You wonโt grow it into 100 million. It will get lost midway. But if you get the formula right and you learn how to avoid mistakes and temptations along the way, you will grow whatever capital you have into a fortune.
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That message was picked from the book .
