Wednesday, February 1, 2017

dfcu weds Crane: a forced Marriage and the ‘courtship’ dots!

"I am deeply concerned and apprehensive on our dfcu takeover of the failed Crane bank, our dfcu leadership of late is trigger happy on acquisitions recklessly gunning for scale at all cost; yet our last acquisition of the failed GTB bank dragged under our performance despite lessons of the Barclays Nile banks merger being clear for all to see. The failed Crane bank operated like a gangster bank with low underwriting standards and sector concentration basically with an unknown credit quality of asset book- risky stuff setting up dfcu for a long firefighting episode! I wonder how we shall merge those two cultures and come out better" Andrew Muhimbise dfcu Limited shareholder.

The Bank of Uganda (BoU) released a Public Notice dated 27th January 2017 titled DFCU BANK TAKES OVER CRANE BANK LIMITED; in which the BoU stated that on the 24th day of January 2017 Crane Bank had been progressed from statutory management to receivership and that BoU as receiver had transferred the liabilities and assets to dfcu bank; this immediately raised my hairs as a shareholder of dfcu Limited hence the above statement I issued on my Facebook page; many complained that my statement was unfair and speculative; therefore in that regard am beefing it up in this article below titled

dfcu weds Crane: a forced marriage and the courtship dots

dfcu Limited, dfcu bank, Who is what?
dfcu in full is development finance company of Uganda, these along with hfcu aka housing finance company of Uganda were started by the newly independent state in the early 1960’s under the Uganda Development Corporation (UDC) then led by the visionary Acholi man named Semei Nyanzi.
dfcu Limited is the company listed on the Ugandan Stock Exchange and is the sole owner of a bank called dfcu Bank; therefore the one which bought the failed Crane Bank is a wholly owned subsidiary of dfcu Limited.

dfcu Bank; a build-up of failures Vs innovation ‘Acquiring as much as possible’
In the past three years dfcu bank has been the sole acquirer of all failed banks and by consequence the failed banks they acquired that is; in 2014 dfcu acquired the failed Global Trust Bank (GTB) owned by Nigerians associated with the IGI Insurance company which in Uganda also majority owns the National Insurance Company Holding aka NIC and before that GTB had acquired the vague Credit Microfinance Limited (CMF) from Bitature, Kabonero and associates.
Now the same dfcu acquires the failed Crane bank which had acquired the failed National Bank of Commerce aka the Bakiga Bank.
This build-up of acquisitions of unforced failures sets up dfcu bank for hard times ahead; it important to note that dfcu’s profit in the financial year 2015 dropped to 35 billion from 42 billion earned in the financial year 2014- a 7 billion drop owing mostly to the house cleaning challenges associated with the acquired failed Global Trust Bank- a much smaller and less complex bank than the Crane bank that dfcu is trying to swallow.

Acquiring brick and mortar bank assets and the very fluid customer deposit clientele as a way to scale a bank’s retail business is at best intellectual indolence to engage in innovation and at worst chasing the wind.

When a bank is declared a failure the cream clients move, the most valuable of the estimated 720,000 account holders of Crane bank- the Indian community already moved to the: Baroda and Bank of India Banks; dfcu will have the non- performing clients and highly indebted customers who can’t go anywhere.

The advent of mobile telephony as evidenced by mobile money leapfrogging the combined brick and mortar banking businesses  is the way to scale; in Kenya as one banks fights with a telecom company to allow it have its own sim card; dfcu leadership is acquiring brick and mortar completely ignoring the role of technology in scaling banking, unbelievable!
A leaner not bigger bank is what will seamlessly scale.

dfcu has once again thrown the chance of ingeniously improving her customer offering through technology, whatever happened to making more possible has turned to acquiring as much as possible.

Gangster Bank; gangster culture ‘chap chap’
 Anyone even half-attentive to the banking sector happening in Uganda knew some open secrets on Crane bank’s operations, for now I will stick to my statement;

            Low underwriting standards- in the banking industry Crane was a legendary buyer of distressed loans from other banks and they did things ‘chap chap’ the kind of speed that would give a money lender a run for his money thereby compromising due diligence and throwing out the rule book on which capitalist banking is built; these are the assets and culture that dfcu is acquiring, it is inept to believe what dfcu is saying that they are only taking the good loans.

            Sector concentration, the so called super rich of Uganda under the umbrella group KWAGALANA where Crane Bank’s Vice Chairman Sudhir is an eminent member; basically tell eloquently the story of Crane’s credit concentration: South Sudan and Real Estate a vicious cycle that feed on one another and brought down the pack of cards.
            Remember the post-election 250 billion bailout list, well dfcu just assumed the bulk of it just like that!
dfcu bank has a similar clientele to Crane: Kikuubo importers and the buildings tycoons; now we are going to have a boiling pot of multiple borrowers converge in their new home- dfcu- you cannot rule out the likely possibility of identical collaterals on two separate loans.
Definitely this brings into question whether the credit quality of their asset book is known or even knowable; dfcu will have to struggle or even may be adapted to the gangster kind of banking a sure firefighting period ahead that will test the expertise of Rabo Agriculture bank as the sole banking expert on the shareholders list.

A forced marriage
At the end of 2015 it was alleged that Crane bank was worth $500m and dfcu bank $446m.
It was in the highest interest of Bank of Uganda to make this marriage happen; and so it could cover up her own weak spine; Bank of Uganda knew of the Crane bank woes much earlier but the political wheeler dealing kept the Crane afloat until it was too much; like in the fighter jets purchase saga BoU is saving face by forcing this marriage- Crane should have been left to die a natural death like the others who committed lesser evils; instead of early digging of our dear dfcu bank grave.
dfcu has basically let BoU off the hook and for what… brick and mortar! C’mon.
dfcu Limited the parent company of dfcu bank has credible shareholders in Norfund/Norfinance of the Norwegian Oil fund and Rabo the cooperatives agriculture bank of Holland.
Forced marriages in this era blow up in the face of the ‘parents’ in our case BoU as it is postponing a real estate bubble centered in the banking industry.

Share capital Risk
The East African story ( on the subject says Rabo bank & Norfund/Norfinance put down $40m for the purchase of Crane; could they be preparing to recoup their money by issuing themselves shares? Possibility as they could stealthily do it with the hidden from the Stock Market dfcu bank share capital since they made a commitment to the Bank of Uganda to raise equity.

Courtship dots!

“Great minds discuss ideas; average minds discuss events; small minds discuss people.
Eleanor Roosevelt

Well Mr. President, it is people who make things happen and therefore we gonna have to discuss them; their intentions, motivations and presence or absence.

Ruparelia family (Hindu Capitalism)
The subject matter: Sudhir his wife and three adult children had senior roles in the bank; yes that included the erratic and reckless Rajiv whose contribution to breaking up the father’s empire is well known in this town.

Juma Kisaame (dfcu MD 10 years +)
At the last dfcu AGM I had personally asked our MD Juma to resign because of the handling a tea estate deal gone sour and the hike in non-performing loans, After a dismal performance any MD would need a deal to keep them in the job; this is such of kind as Juma will have to stay around to see through his ‘baby’. Juma acquired GTB and we lost 7 billion, I wonder how much we are going to lose on Crane bank, this talk of increasing the retail base is hogwash- just the perfect cover up for needless empire building and an unnecessary job protection stunt.

Samson Muwanguzi (now deceased)
Less than a year ago around March 2016 Samson Muwanguzi mostly known for his ownership of Lido beach Entebbe, then Chairman of Crane Bank, died of natural causes at the age of 60 years; exactly 7 months later Crane bank is put under statutory management. Crane bank in 2015 had just been placed in the Domestic Systemically Important Banks (DSIBs) bracket by Bank of Uganda hence more capital and closer scrutiny; he was also the Chairman of Kampala Parents School.

AR Kalan (anywhere in exile)
A flamboyant character with an ego to match, was Sudhir’s right hand man, Mr Fix-it and MD Crane bank, I knew him for his tenure as Director at the Ugandan Stock Exchange where he occupied the board seat of Crane Financial Services (by the way its status should be clarified by BoU and USE) a stock brokerage arm under or related to Crane bank. It is alleged he took off with his boss and mentor’s money; watch what you do in the sight of your ‘children’ they will practice unto you.
To-date none has clarified on the why and whereabouts of Kalan, but just before he took off – he and his wife sold their PRISM plaza on Kampala road which once housed the Uganda Stock Market. I believe the Bank of Uganda forensic audit will shade some light on Kalan the banker.

P.K Gupta (no idea)
I first met Gupta as Baroda bank Managing Director for Uganda; to simply put it he was an idiotic fellow, well educated in banking but unschooled human and emotional intelligence- it was of great relief that he was transferred from Baroda Uganda to both the Indian and Ugandan employees even to a shareholder like me-self; Sudhir tapped him from Baroda London to take the reins after Kalan’s US ‘medical leave’ which I presume is still on. He was the perfect sycophant to bring down Crane.

I hope we the 3,800 other shareholders will survive this expensively acquired gangster bank of smoke value!

Andrew Muhimbise
Lumumba House

One of the 3,800 shareholders of dfcu Limited which owns 100% of dfcu Bank.

Thursday, May 28, 2015


Rwanda is a small mountainous country in the middle of Africa, it has had a stellar Public Relations performance ever since the Rwanda Patriotic Front (RPF) took power and control of this small Nation,
I mention RPF because this ruling party owns the selling shareholders: Crystal Ventures which is offering 100% of their Special Purpose Vehicle Crystal telecom owning 20% in MTN Rwanda.
Am to use an approximate exchange rate of 1 Rwanda Franc for 4 Uganda Shillings

IPO Details:
Opening Date: 21st May 2015
Company: Crystal Telecom
Selling Shareholder: Crystal Ventures
Business: 20% owner in MTN Rwanda, a Telecommunications company
Shares on Offer: 270,177,320
Percentage of Offer: 100% (equivalent to 20% of MTN Rwanda)
Offer price per share: 105 RwF (UgX 416)
Minimum application: 1,000 shares (UgX 416,000/=)
Offer Proceeds: 28,368,618,699 RwF (UgX 113 billion)
Allocation: 75% ($30m) Institutional Investors and 25% ($10m) Retail Investors
Closing Date: 5th June 2015
Listing Date: 17th July 2015

I have read through their prospectus which reiterates the Rwandan PR machine savvy (a very good skill by the way) and below, after a deeper look into this Telecom CRYSTAL BALL, is why I think investors in this IPO are bound to cry, later rather than sooner:

1.    IPO price Valuation- 105 RwF
The real financials of this IPO lay somewhere else that is MTN Rwanda, and a glance at their 2014 books points to a 6 billion Rwanda Franc (24 billion Ugand Shillings) profit, therefore for the Crytsal Telecom 20% we are talking of 2014 4.8 billion Uganda shillings in profit with an asking price of 113 billion Uganda shillings for that 20%; ordinarily companies are valued at X10 their earning, meaning they give the investor at least 10 years to recover their money, this would come to maximum 48 billion UgX- paying 105 RwF where one could pay 45 RwF is something to cry about especially knowing that each share worth 105 RwF earned 4.5 RwF as at end of 2014 but wait what about the equity statement

2.    The Equity Statement- depleting retained earnings
MTN Rwanda had a profit of UgX 24 billion and paid a record dividend for 2014 of UgX 42 billion, there are no prizes for guessing why Crystal Ventures the selling shareholder was paid around UgX 6 billion in dividends just before they exit the shareholding; of-course the 18 billion balance came from retained earnings.
This is clearing out before, it’s a like a house seller digging up and going off with the tile works and other house finishes, you would definitely cry if such a house is sold to you, Statement of Equity is where business owners wealth is built over time- remember the basic accounts: Assets = Capital/Equity + Liabilities, with this in mind your pointing to Liabilities filling the gap. Of-course all this was achieved with the 11th May 2015 Shareholders agreement, typical white caller heist on a ‘to be sold company’ asking for $41m after all those pay outs, the shareholder agreement between Crystal Ventures nd MTN Group gives a hint.

3.    The Shareholders’ Agreement preparing for EXIT
            Crystal Ventures and MTN put pen to paper on a shareholders             agreement, in their Crystal Ventures management fees it was     earning         annually alongside MTN group going forward is terminated, you wonder     why not pass it on to the next ‘holders’ whose sole business will any way            remain holding and managing the 20% stake in MTN Rwanda; this is a lost             income on   incoming holders as in the corporate world management         fees are a dividends which attracts minimal taxes, we are talking about    UgX 1.5 billion in management fees paid to Crystal Ventures in 2014 alone   which is 25% of their earning per share- it’s no more anymore all goes to          MTN Rwanda.
            There is even no dividend policy agreed other than the obvious that dividends will be paid out of profits, don’t forget dividend from MTN         Rwanda is the sole source of income for Crystal Telecom       
            This exit reason for crying is the loss of corporate power and clout of Crystal Telecom going forward, without the backup of the ruling party’s   business entity who will reign in MTN group in how it manages MTN       Rwanda- No one, the agreement tells of behind the scenes negotiations             sacrificing management fees income for depletion of retained earnings-      welcome to the world of corporate power dealing; why then not List MTN           Rwanda directly
4.    Why not LIST MTN Rwanda instead! ‘The Double Tax trap’
            This IPO arrangement will ensure shareholders are unnecessarily double        taxed why else do you have the concept of group companies!!!, first at             MTN (corporation tax and withholding tax on dividends) then     once again             at Crystal Telecom; my gut tells me MTN Group did not         accept this- to be listed directly so they have more leeway to freely do stuff like      management fees, therefore this is like a flying kiss- the other      person           intends it (ownership in MTN) but it’s never felt, like a simple corporate    action of converting debt into equity could wipe out the distant         shareholders who by now will be scattered and have no clout whatsoever, Crystal Telecom will be a helpless orphan of a formerly   powerful and rich parents- I would cry in that situation.

5.    Growth prospects and comparisons
MTN Rwanda has 3.9 million subscribers and made 24 billion UgX, compare this to MTN Uganda with 10 million subscribers which made 220 billion; this points to an efficiency gap or sheer lack of depth in the Rwandan market; these 3.9m are with 10m subscriber market- for me its seems MTN Rwandan is a mature company whose growth will not be spectacular at-least from the figures point of view as per net profit per subscriber plus also there will be a lack of deliberate clout that has over the years been provided by Crystal Ventures the ruling party, RPF’s, business arm- the only clear thin advantage is delinking RPF holding in MTN Rwanda to the Public

Muhimbise’s last Word
The above 5 points would make me cry, so no flying kiss from me but I like and appreciate the spirit in which Crystal Ventures cedes its MTN Rwanda holding to the public, it would nice along the way for MTN to do a share swap to allow real direct ownership,
The $41m to Crystal Ventures will allow it to deploy capital elsewhere as it says plus add depth to the nascent Kigali based Stock market

Andrew Muhimbise

Retail Investor based in Uganda, Rwanda’s friendly neighbour

Thursday, May 2, 2013

MONEY: The Inseparable Quadruplets & Muhimbise’s Take!

Money and Sex are the TWO hardest topics to discuss in recent mankind history, depending on how these two are managed in any individual’s life- there will be determined a PERSON’s success or challenges throughout their lifetime- It is therefore worthwhile to interface with these two topics: early, frankly and honestly- It beats me as to why they are not thoroughly taught in the school education system...

Today our topic dwells on the one half; MONEY
And the comprehensive presentation below is meant to tickle your thoughts on money for the better

What is MONEY?

Money is any object or record that is generally accepted as payment for goods and services and repayment of debt in a country.
Other names of MONEY: cash, currency, change, wealth, capital, funds, riches.

History of Money- The Evolution
In the beginning more than 100,000 years there was gift economics and debt based on trust, then Barter trade was between either complete strangers or potential enemies (ones who might not have honoured their debt).
As trust declined and commerce took centre stage, Societies later developed the use of commodity money; In Africa with the Arab traders we adopted the use of shell money- cowry shells; around 650-600BC in came gold and silver coins.

Commodity money was so popular since it attracted less risk and later evolved into Representative money, here gold and silver merchants or Banks would issue receipts to their depositors- redeemable for commodity money deposited.

After World War II- with the replacement of the Great Britain as world super power by the USA- at the Bretton Woods Conference (Where today’s World Bank, IMF were created) most countries adopted currencies fixed to the United States Dollar, the US Dollar was in turn fixed to Gold.
In 1971 the US government suspended the convertibility of the US Dollar to Gold, after then most countries unplugged from being fixed to the US dollar- That US decision ushered in FIAT money which is still the world order to-date.
In Uganda the Uganda Shilling is not backed by anything save for government issuing it as Legal tender and its ability to convert money into goods and services via payment.

Uganda’s Money Evolution
Uganda’s money history dates back to time immemorial when in the Chwezi dynasty, headquartered then at present day Bunyoro- Lake Albert area (Oil!), practiced the exchange of Salt and iron mainly for other commodities that is BARTER TRADE.
When the Chwezi empire, believed to be origin of all Royal families in Uganda- Eastern Congo and Karagwe (Northern Tanzania area just below lake Victoria), collapsed trade continued as usual and the Buganda and Bunyoro Kitara Kingdoms stood out as very organized commercial zones doing barter trade in the commodities of: Salt, Iron (for spears and hoes/jjembe), Ivory and rhino horns

Around the period 1700-1800 the Arabs traders’ who came by dhow on the Indian Ocean mainly traded simple goods like cloth, mirrors and complex ones like guns for slaves, raw material and ivory they were later to convert to cowry shells as a medium of exchange
In the mid 1800 came the Christian missionaries (Catholic and Anglo), with that turning Uganda into a British/Anglo Protectorate we adopted use of the British pound and a semblance British Financial system rules and regulations.
At the onset of building of the Mombasa-Kampala Railway the British Colonialists brought in expert labour to build the railway and those were Indian coolies- they were later to settle and even invite their relations to par take in the virgin economy that was Africa; people like the Madhivanis operated a shop or dhukawala around that time- The Asians were to be given preferential status notably in economics over the indigenous Ugandan by the Colonial power- this could have planted the seeds for Uganda’s 1970’s economy short circuit
 Anyhow in the years leading to Independence in 1962 our own currency, just like the Uganda flag and National Anthem, the Uganda Shilling was born, it’s worth noting that most of early currency had pictures of the President in power the reason when there was a change in government the Currency followed i.e. Obote I to Amin to Obote II and to Current
The Bank of Uganda (BoU) as we know of it today was created on the 15th of August 1966, it is owned 100% by the Government of Uganda but it is not a government department, BoU conducts all its activities in close association with the Ministry of Finance, Planning and Economic Development and its Vision is: To foster price stability and a sound financial system.
BoU is responsible for monetary policy and maintaining price stability
Other Salient Milestones in Uganda’s Monetary evolution
1968- Nakivubo pronouncement, ‘The Common Man’s Charter’ Move to the East (Socialism)
1972- Economic War ‘Action harsh harsh implementation of the Nakivubo pronouncement’, the most active economic group the Indians of British citizenship were expelled and given 90 days to leave Uganda; at the time they were 3% of the population controlling more than 80% commercial activity of the Ugandan economy.
1977- Peak of an economically unviable state characterized by hyper inflation, international isolation & sanctions, scarcity of essential commodities (issuance of chits) and Amagendo by mafuta mingi (Smuggling)
1982- Revival of Co-operatives that had collapsed
1983- Return of Asians expelled in 1972
1986-1990- Berlin Wall collapsed, final nail in Cold War- a War between Capitalism of the West and Socialism systems of the East, with Capitalism winning Uganda Economy Liberalisation is cemented and started with the SAPs (Structural Adjustment Programmes- IMF/World Bank initiated and led)
1987- Currency reform which knocked Two zero’s off the Uganda shillings and creation of the ‘1986 Millionaires’ (class of entrepreneurs who have worth more than a million dollars mainly aided by state association or bluntly put- Corruption)
1991- Start of Implementation of sale of Government owned Assets- PRIVATISATION, 1986 Millionaires in action
1997- Opening of the only Stock Market in Uganda, The Uganda Securities Exchange to mainly provide a transparent platform for implementing and spreading out privatisation
1993-2000- Collapse of major Banks of Greenland Bank with muslim holding run by ex-Governor of the Uganda Central Bank, the International Credit Bank (ICB) an indigenous bank run by the then enterprising Katto family, Co-operative Bank owned by the then limping Co-operative Societies spread across the nation, Sale of the then largest bank Uganda Commercial Bank (UCB yes we had our own KCB)
2003/2004- Banking sector is on recovery, the Financial Services goes on to be an excellent performing sector averaging double digit growth only bettered by the Telecommunications sector
2008- Launch of the first mobile money service, MTN mobile money
2011-2012- Record inflation due to excess money supply in economy, attributed to parallel currencies (old and new notes) in economy running and the money flow in the 2011 Presidential campaigns, Banks increase lending rates following Bank of Uganda’s crackdown on inflation
2013- Old currency being withdrawn, foreclosure market to liven, Banks tighten their credit issuance (real estate collateral significantly loses credit attraction value).
2013-2070- late 2000’s discovery of Black gold or Oil cash-flow (out and in), management and utilization of this OIL resource, should give guidance on the future of UGANDA MONEY!

VALUE of Money
Money derives its value by being declared by a government to be Legal tender.
The money supply of a country consists of Currency (bank notes and coins) and Bank money (held in Bank accounts also known as record money), Uganda is said to have 4 million bank accounts out of population of 33 million bank accounts across its 26 Commercial banks therefore by far the largest form of money supply here is Currency/Cash hence the term commonly used Cash Economy- of late electronic mobile phone enabled money is catching up.
Uganda Legal Tender: Uganda Shillings; Coins (10/=, 20/= (Uchumi Nakumatt issue this change), 50/=, 100/=, 200/=, 500/= & 1000/=) Paper (1,000/=, 2,000/=, 5,000/=, 10,000/=, 20,000/= & 50,000/=)

Monetary Policy
Fiat money, the current world order, has no value it therefore has to be managed.
Monetary policy is the control of money in the economy and it is a process by which government or economic blocks (Central Bank, Eurozone Central bank, Federal Reserve Bank) manage money supply to achieve specific objectives; the main goal of monetary policy is to accommodate economic growth in an environment of stable prices.
A failed monetary policy effects include: hyper inflation (Zimbabwe), high unemployment, shortage of imports, recession (USA, Eurozone).
Uganda is a semi controlled free market economy where people are allowed to determine prices of goods and services under the watchful eye of the Central Bank which intervenes at and when it perceives risk e.g. the 2011 excess money supply scenario was responded to by the Central Bank.
In Missiri/Egypt the government determines the Rent citizens pay as opposed to the market (land lord and tenant agreement or disagreement) here in Uganda; In Egypt tenants are very powerful more than landlords- this is a direct sluggishness in the development of Rental real estate as the capital holding magrebs prefer to build resorts along the Nile and Mediterranean

Money Functions
Money can and will fulfill the functions below;
Ø  Medium (of exchange)
To pay for goods and services, this sorted the Barter trade system challenge of the double coincidence of wants i.e. one had to need what their barter trade exchange partner needs and vice versa
Ø  Measure (Unit of account)
Provides a measure, divisible into smaller units; acts as a basis for quoting and bargaining of prices. The important usage is as a method for comparing the values of dissimilar objects.
Ø  Standard (of deferred payment/debt)
To settle debt, debt has a premium so as inflation is managed i.e. that is such that another’s money does not lose value.
Ø  Store of Value
This is very much manifested in stagnant savings

Money Functionality Argument:
There is an argument on the role of money as a medium of exchange being in conflict with its role as a store of value: its role as a store of value requires holding it without spending, whereas its role as a medium of exchange requires it to circulate

Types of Money
         Commodity money, is tagged to a commodity and value is derived from there, the commodity could be: gold, silver, copper, salt, rice, shells, cigarette etc
        Representative money, token coins/ paper money that can be reliably exchanged for a fixed quantity of commodity- it’s not fixed to commodity
        Fiat money, is value by Government Order (or in-order like Zim dollar crisis), the Value has no real basis, easy to replace, carries less risk, You know its costs more money to make a 500/= coin as compared to a 50,000/= paper note.
        Coinage, are coins they are still used  example gold coins are used for large purchases like buying military equipment, silver for midsized transactions and copper coins for day to day transactions- are more durable form of money.
        Paper Money, bank notes which began as promissory notes for depositing bulky coins, reduced risk as its transportation is easy and its traceable (serial numbering)
-          Commercial Bank Money (Demand deposit), money Legal Tender here is held in ledgers or record; it’s from it that the economic revolutionary Credit Creation originates, there is risk of demand deposit not being fulfilled (2013 Cyprus eurozone Bank crisis before that the 1990’s Banking crisis that saw closure of: Greenland Bank, International Credit Bank-ICB, Co-operative bank and to an extent UCB-Uganda Commercial Bank) In Uganda demand deposits are insured to a tune of 2,000,000/= anything above is shauri yako (your risk), products operated in their are savings and current accounts through transaction of cash/cheque/ATM.
Advantage here is ease of issuing debt
Disadvantage, inflation is just a print away and the related speculative impact by its very nature- too much leverage, the 2008 USA’s Financial Crisis (still ongoing as at 2013) started in Banks taking excessive risk by excessive leverage (issuing housing debt to those who could not afford)
-          Digital Money- Today & the Future, this is in three main categories i.e. Internet, Electronic and Mobile telephony, the first two mentioned are entwined with Banks i.e. Internet banking Electronic Funds Transfer (EFT) and others.
Mobile Telephony Digital money, this was hatched in our neighbourhood by Safaricom creating the revolutionary M-Pesa mobile money product which inspired our own MTN Mobile money, Warid Pesa, Airtel and Orange Money; this technological innovation is going to ensure that most of Africa skips the heavily leveraged and toxic if you like (because of their superior ability to increase individual consumer debt obligation through leverage) Banking products of Credit Cards. Safaricom’s M-Pesa is fast turning into a Bank in its own right with the introduction in 2013 of its M-Shawri product a micro credit product charged monthly @7% I think. In Uganda we have more mobile money accounts (approx 9m) than Bank accounts (4m). It is interesting to see the traditional Banks scramble to create mobile phone platforms like: dfcu money, Centemobile, Standard Chartered’s Hands instead of Feet. Going forward mobile money transaction will increase if costs of transaction go down- this will happen as initial set-up costs are recoverd and competititon heats up
Money Intermediary:
Banks (Central/Government Bank, Commercial, Development, SACCOs, Village banks) and Mobile Phones through mobile money

Uganda Money related and relevant Facts: The Power Brokers and Actors
- Uganda’s GDP at Purchasing power parity (PPP) is 50 billion dollars
- NSSF, is a 1 billion dollar (2.6 trillion UgX) fund has 500,000 members who save with it, accounts for 2% of the Economy at PPP.
- Sudhir Ruperalia is worth $900 (2.3 trillion UgX), controls 1.8% of Ugandan economy
- Power in the financial system in order: the President, Donor community (Euro & USA), Secretary to the Treasury and his Deputy, Catholic Church (Centenary bank), BoU Governor, Kasekende brothers (Deputy Governor BoU & Standard Chartered M.D), Standard Bank Investments (Stanbic), MTN Mobile money, Sudhir Ruperelia (Crane bank), Legistlature (M.Ps)
- Most technical Ugandans in the financial sector; Kagugube (Centenary), Kasekende brothers (BoU & Standard Chartered), Kibuuka brothers (dfcu & Stanchart), Mweheire (Stanbic NEW), Kisaame (dfcu), Byarugaba (NSSF), Karuhanga (Stanbic), Fabian Kasi (Centenary)
- De La Rue a British Company which has a subsidiary in Uganda, prints the Uganda Shillings Legal tender on behalf of the Central Bank almost all Bank cheques; its therefore worth mention in the money system of Uganda. Charles Mbire of MTN fame is involved in De La Rue Uganda’s operations.

Transition from the Industrial to the Information AGE
In the late 1800 and early 1900 the Industrial age fully arrived in Uganda, the Industrial age was at its peak in its originating country Great Britain they explored the new world to access cheap raw material and labour to sustain their industries, In Uganda we contributed Tobacco and Cotton supervised by the colonial system.

The Information age is understood to have started in the Unites States of America in the mid 1970’s with the growth of the Internet- it is driven by knowledge as opposed to industrial age’s control over the physical factors of production of especially Land and Capital and is the world order to-date
For Uganda the transition can be elaborated in that in the  Early 1900’s Sir Apollo Kaggwa was believed to be the wealthiest Uganda thanks to his adventures in the 1900 Buganda Agreement where he become an unrivalled Land Lord and to-date Sudhir Ruperelia a Ugandan of Indian descent is believed to be Uganda’s wealthiest individual thanks to his majority holding in Crane Bank a Financial services actor.

Muhimbise’s understanding of Money:
Ø  Money is important as it buys: medicine, food, pays for basic comfort (housing) and basically allows one to not only stay alive but thrive on this earth
Ø  Muhimbise’s Money Philosophy:- I RESPECT money and know that money has feelings once its treated bad (lavish spending, excessive risk, too much fear etc) it goes away but once its nurtured and looked after well you attract it like a magnet.
Ø  Rich beliefs attract wealth/money
Ø  Attention and care over money in the early years allows you to keep and grow real wealth.
Ø  Money is managed between the limits of Greed and Fear; Greed to make much more with less effort and Fear of losing it all- i.e quotes like the higher the risk the more the profit; fortune belongs to the bold amongst others
Greed is good, helps us take Action on opportunity, ‘nfuniramu wano’ what is in it for me
Fear is fertile ground for inaction, although it helps in recognition of risk, it should not be excessive so as to kill initiative and action.

Important Facts on money;
-          Just like religion organizes people’s understanding of the world beyond science, money organizes commerce or exchange of goods and services plus payment of debt.
-          Money is not an end in itself- it’s a means to an end; it: will buy medicine to cure ailment, will buy food to cure hunger, will pay tuition to acquire knowledge amongst many others.

Money is very much a Tool of War: for Power Supremacy and fighting against poverty if you like

Money & Power: CHOICE
To chose between power and money, the former is my automatic choice, as it to larger extent controls the latter

Money Conclusion
To a large extent therefore Money is controlled by the state/government/politicians in-charge of the military, therefore as an Individual if you are to have total control over money then take Control of the STATE, nonetheless at an INDIVIDUAL level you can work around the four quadruplets below to take charge of your Money as in general terms governments generally act in good faith towards their citizenry and this is how;

The Inseparable Quadruplets: Earning, Saving, Investing and Expenditure

Whereas Money is controlled centrally by the government, at a personal level either one takes control of the central management of money (Take control of government) or work around the four quadruplets that relate to money- which is within anyone’s: reach, ability and can be worked upon/towards personally- below I explain the quadruplets and their relationship to Money adding my ‘take it or leave it’ wisdom

How the Quadruplets Inter-relate with Money

Also known as Income, this is the sum of all: wages, salaries, profits, interests payments, rents and other forms of earnings received in a given period of time
Salary, commission and wages for an employee, salary and dividend for Self-employed, Business owner Dividends and Capital Gains on sale and Investments owner (land, houses, shares, businesses etc), royalties for intellectual property- these relate to all the Factors of Production in Economic speak

Muhimbise’s Take!
Earning is a puzzle of attitude, where there is an opportunity to provide value and its paid for that’s earning, don’t focus only on what you studied: I personally studied a bachelors of Business Administration degree but I have worked at the following as earning avenues: Researcher, Procurement Trainee thereafter Consultant, Fish trader, Stock Market trader & Advisor, Tour Guide, baby sitter, Economics private tutor, Business Writer, TV show contributor, Translator to English for Luganda/Rukiga/Runyankore, manager of raw sand (Kirombe) deposits, a Private Equity discussant, an International Company Representative and Agent, a Trustee, a Director Trainee, A brick layer, a Speaker, a Messenger/errands boy and I continue to pile on earnings opportunities; my philosophy is as long as I have the time I will take on the earning opportunity because I have learnt lots of skills and real life scenarios from doing things out of my comfort zone (what I studied).
Because from my Education I learnt four major literacy’s of: how to Speak, how to Read, how to write and how to count and compute numbers (numeracy), these make me trainable in anything and everything.

Build on your knowledge and understanding of earning opportunity, it’s is not by mistake that employees study till University and work at specific job, so seek out to Learn about target investment.
Focus on quality sustainable earnings, could be of less return If something/earning opportunity is too good to be true- it’s just that too good e.g. forex trading bubble, sports betting and its odds

Take responsibility and full control of your earning early, track and record them by among others reconciling your bank statement, this will give you a clear understanding of your earnings and way forward

Debt/credit, is an earning- it is income of tomorrow brought forward to today; it’s a future income you access at a premium, It’s like a double edged sword; you use it well (as in to earn more income and pay its premium/interest) you benefit from leverage; you misuse it- it could get you jailed or even bankrupt

Factors that contribute to high income: Education, Globalisation, Economic freedom, Knowledge/Innovation and Peace or absence of war

Relation to Money: It does not matter how much money you earn, what matters is what you do with what you earn. The very reason why sometimes salary increments or money windfalls just worsen people’s financial woes.

     2. SAVING
I view saving as investment and investment as deliberate action saving;
Savings are in two forms: you will either save for near future income for expenditure OR for much later bigger expense, example you might buy a small piece of land with goal of buying bigger land once the small one appreciates; like our fore fathers before us practiced this with their crop stock i.e. seeds were kept in the Granary (for feeding the family similarly money could be kept on savings account to cater for short term needs) and hanged at the kitchen Fireplace (for seeds to be planted at the onset of next planting season similarly saving for retirement by starting off buying shares worth 50,000/= per month with possible cumulative impact from your 20’s )

Muhimbise’s Take!
If you cannot save 1,000/= of 10,000/=  you will always fail to save that 10% even when a billion shillings is at your disposal it will be impossible to have a 100m on you- just the percentage law of money.

Set savings targets and monitor your performance, sacrifice, delay gratification on expenditure, make priority (20/80) as per Pareto’s rule check out the 20% items that consume 80% of your income and review accordingly,

My personal saving target for 2013 is 2m per month (1m on stock market and 1m at my Investment Group)
Be content with what you have, channel energy to going where you hope to go, use peers as inspiration and not pressure or origin of envy

Write a will, in this exercise you discover your current status from your eyes; gives opportunity to confirm and declare who you are including your current financial status

Savings provide a bridge to and for investment, otherwise you will not be in position to even know opportunity let alone take it on with zero saving

Saving is not idle money, cheap talk that under looks savings as idle cash is idle

Create saving habit, excuses for not are in plenty- I have children I can’t save, richest persons are married and have kids too; take responsibility and stop whining and faulting everything around you (clumsy reasoning to avoid Action)

Relation to Money: Savings is about the percentage (quality) of your earnings not the big figure (quantity)- if you cannot work with a little there is no proof (since you will automatically lack the money practical  knowledge) you can accumulate much.

“Investment has different meanings in finance and economics.
In economics, investment is related to saving and deferring consumption. Investment is involved in many areas of the economy, such as business management and finance whether for households, firms, or governments.
In finance, investment is putting money into something with the expectation of gain, usually over a longer term. This may or may not be backed by research and analysis. Most or all forms of investment involve some form of risk, such as investment in equities, property, and even fixed interest securities which are subject, inter alia, to inflation risk.
In contrast putting money into something with a hope of short-term gain, with or without thorough analysis, is gambling or speculation. This category would include most forms of derivatives, which incorporate a risk element without being long-term homes for money, and betting on horses. It would also include purchase of e.g. a company share in the hope of a short-term gain without any intention of holding it for the long term. Under the efficient market hypothesis, all investments with equal risk should have the same expected rate of return: that is to say there is a trade-off between risk and expected return. But that does not prevent one from investing in risky assets over the long term in the hope of benefiting from this trade-off. The common usage of investment to describe speculation has had an effect in real life as well: it reduced investor capacity to discern investment from speculation, reduced investor awareness of risk associated with speculation, increased capital available to speculation, and decreased capital available to investment.” Wikipedia Internet

Muhimbise’s Take!
Linking saving to Investment= Financial intelligence- it’s not about how much money you make but how much money you keep (save) and how hard that money works for (investing) and how many generations you keep it for. (Kiyosaki)

The higher the return the higher the risk

Knowledge (financial) diminishes RISK (financial), deliberately up your investment knowledge

My personal goal as an investor is to achieve financial freedom with the sole purpose of ‘having an independent minded me, who is able to meet the basic needs and some wants for a comfortable and desirable of life devoid of ostentation’

When investment is talked about the most common excuse is Capital/money;
Capital is from the Latin word capita, capita means head in Latin (Latin is Roman catholic Church’s language and is mother to all European languages of English, Italian, French, German, Swedish etc English we are accustomed to I sthe least developed language from Latin), sell opportunity and take share or commission, start small and learn along the way

When in ACT of Investing
-          Financial intelligence, work towards improving your financial IQ, it’s no secret that many University graduates cannot read a bank statement (credit and debit); the reason you see many people who did not go to school making it- they are financially literate they understand money and its movement, they know the difference between Assets (make you money) and asset-liabilities (lose you money)
-          Complete project, half efforts = half returns, do things deliberately and completely
-          Avoid MAN/Peer investments e.g. daddy worked 40 years to build you will not do same under 7 yrs of work without commensurate effort
-          Never fall in love with investment deals, be willing to walk away and do so if you feel so
-          Don’t be in a hurry to make money- Take time and effort otherwise conmen are in plenty and it heightens ones Greed
-          Can One invest without saving/money: YES use your capita/head and accumulate your saving- you will but with less power since money from elsewhere, they say when a wise person meets a rich person, the wise goes away with money and the rich goes away with wisdom, a win-win exchange
-          Some of the best investment opportunities are dressed in ugly coats of hard work, effort- that’s why many a people cry out and give up; they are about solving a need in community
-          Some of the best actionable opportunities not seen by eyes but brain, you do not invest because your friend is doing a certain business and has bought a car, Rolex business replica dilemma = Zero innovation; Don’t Follow the HERD its running from somewhere!
-          Rich beliefs attract wealth, the more you invest you upgrade and the opportunities are immense the dictum ‘the rich get richer..’ is true if you have a million on your savings account there are opportunities that will present themselves a situation which would not occur if you had 100,000/= only
-          Steer clear from the negative and cynical persons, they have no idea what it takes they just want everyone to stay at the same level as them year after year
-          Failure is fine (and you will at times fail), aiming for second best isn’t, though school abhors failure, I personally view it as school fees for my Master program in Continuous Investment, over the recent past years I have computed and appreciated that for every 10/= profit I make from INVESTING, 3/= is lost/loss (investment school fees) and I keep 7/=; so in effect I make some lose some and at the end of the day I keep more than I lose = Investing.
-          Power of numbers, look out for synergy and investing as a Group, eg the Rats Network Investments Group, not only do you pool funds, you share risk and understanding, put on table your strengths and there is compensation of weaknesses as well.
-          You cannot attract what you resent, this is usually a function of human emotion- we hate rich people even without reason, I personally despise corrupt people because they partake in cheating my government, but the rich where effort is evident (they at times have their faults like all of us) I like them very much and like to seek them out to tell me of their wealth formula- Everyone has one, every investment has one as well.
-          Keep a record of your investments so you know the performance; when to exit if mature when to hold on
-          Investment risk is managed by diversification, serial entrepreneurship is Ugandan case study- there are several opportunities business people are spread across the economy- serial investment
-          Set investment targets for yourself, have something that will wake you up early every morning to work towards e.g. build rentals Units for each of your Children even when you have no Child yet- you will have set a powerful goal to push you forward

Where I invest mainly: Stock Market, Private Equity, RNIG Investment Group

Relation to Money: In the act of investing, money is vital component as it brings in leverage or power; it helps execute investment opportunities in real terms.

4.    Expenditure
I deliberately have it as number 4, as the four quadruplets should be treated in this sequence: you need to earn- no matter how much then save-regardless of what you earn then invest- even the little you have; after allocating money for saving/investment this Expenditure can come in. Always live within your means focus on generating wealth and not just appearing RICH while piling up reckless debt.
A spendthrift (also called profligate) is someone who spends money prodigiously and who is extravagant and recklessly wasteful, often to a point where the spending climbs well beyond his or her means (income). The word derives from an obsolete sense of the word "thrift" to mean prosperity rather than frugality, so that a "spendthrift" is one who has spent his prosperity e.g. BAD BLACK, Marie Antoinette causer of the French Revolution
Frugal- Milton Obote (Obote I, 1962-1971), Patrick Bitature, Warren Buffet, Bill Gates

Muhimbise’s Take!
Muhimbise’s expenditure Philosophy
-          A buck should be thrown for a bang
-          Expenditure also includes value expenditure (Investment) where one expects to get a direct gain
-          Embrace simplicity in living, focus on impact of what I do not how I appear in others mind
-          Keep track of my daily expenses and run a budget, excellent planning tool
-          Cut wedding meeting attendance and contribution to control my expenses, I would like to see people work with what they have and can comfortably afford, we the young make weddings fit for our parents stature yet after we go to live-not with our parents; since wedding meeting create a SOCIAL DEBT TRAP CYCLE ‘I contributed to you so come over plus others and do the same’
-          Peer pressure is real out of the teen age, you will spend reckless just to keep up with friends, buy a car, rent in an up-market neighbourhood, install DStv full package when you are never home and even watch soccer at the bar, stock your house with flat screen leather seats when your pockets are bleeding, all this to keep up with your peers.
-          Indian strategy, Funnel- work your expenses to be less than income, it happens and therefore is not impossible; otherwise you will keep whining how little you are paid year after year; I don’t believe in too small or too big a salary, while the office assistant has not enough money to buy a plot of land in Wakiso, The CEO has not enough money to buy land in Kololo- COMMON SENSE
-          Health and Wealth are my uncompromised expenditures, will spend as much as needed on these two, as one keeps me healthy the other ensures I keep there and thrive as well

Relation to Money: Expense necessitates money to play her role of being a medium of exchange of goods and services; ensure you get value for each shilling spent- you are your own keeper of your money

Relating the Four Money Quadruplets
Note: Asset is something that keeps money in your pocket after investment.
Liability is anything that continues to take money out of your pocket debt or after investment. Wealth is how Long
Cash flow Patterns of: Draw arrows as per below
1.      Rich- their income is directed towards assets so as to accumulate more income from those assets
2.      Middle-Class- Most Income earned is directed towards liabilities which inturn increase on their expenses, making ‘asset’ purchases that help raise their status, in effect to keep and help them appear rich, they use easily accessible debt to finance what they would not afford from savings and income; they keep appearances- American consumer middleclass highly indebted; where most of US today will be or are
3      Poor- Every Income Earned is used for Expense, they live hand to mouth. For the next pay

Food for thought:

P               Planning is bringing the future to the present so that you can start to do something about in NOW. It pays to plan ahead; it was not raining when Noah built the ark.

“For the love of money is a root of all evil” Timothy 6:10
There is a school of thought that material progress and prosperity, as manifested in Income growth both at individual and national level, provide the indispensable foundation for sustaining any kind of morality or immorality for that matter;
Religion thrives in poverty! What do you think?

“Personal Financial Planning is the process of solving financial problems and or achieving financial goals by developing and implementing (ACTION) a personalized game plan. In-order to be effective this PLAN must take into consideration the overall picture of an individual i.e it must be coordinated, comprehensive and continous (consistency) ”Akamai course notes

Author: Andrew Muhimbise
Member of the Rats Network Investments Group, (RNIG) Uganda.

Presentation prepared for the Rats Network Investment Group 58th Meet Education Agenda, presented on 14th April 2013 at Makerere. Andrew is also a blogger @
Special recognition to;
The Akamai Financial Leadership and Management Practical course April 2012 ( 0751 516118) for the practical knowledge imparted
Websites; Wikipedia, Bank of Uganda