About me.

Andrew M. Mwenda is the founding Managing Editor of The Independent, Uganda’s premier current affairs newsmagazine. One of Foreign Policy magazine 's top 100 Global Thinkers, TED Speaker and Foreign aid Critic



Monday, November 26, 2018

Role of trust in prosperity


Why many Ugandans are stuck in poverty and unemployment even in the face of opportunities

THE LAST WORD | Andrew M. Mwenda | I have lately been arguing in this column that one of the most important drivers of prosperity is human capital. The better the human capital the higher the chances for an individual or nation to become prosperous. Economists use average number of years spent in school by a given population as a proxy for levels of human capital development. I see human capital much more broadly to include possession of marketable skills, labour productivity, shared mentalities such as work ethics and most importantly, trust within the society.

A series of discussions with my friend, Muawiya Mukasa, recently brought this point vividly home. He owns a company registered in Uganda and Dubai. It recruits people from Uganda and takes them to the Middle Eastern nations of United Arab Emirates (UAE), Jordan and Saudi Arabia. His company has partnered with companies in those countries which link these Ugandans to jobs as security guards, hotel attendants and domestic servants in those countries. So Mukasa’s company and its partners in the Middle East earn a commission for their work.

According to Mukasa, there is a lot of demand for Ugandans in the Middle East. He can take 2,000 Ugandans per month. This would create 24,000 jobs per year for many of our unemployed youths on Kampala’s streets and angry on social media. These youths would earn Uganda foreign exchange since the average nominal salary for security guards in Dubai is $700 plus accommodation and transport. And Mukasa’s is one of tens of companies in Uganda that do this work.

Only last month, Mukasa’s company and its partners from Dubai came to Kampala on a recruitment exercise. They interviewed 500 Ugandans of whom 200 passed the interviews and, therefore, qualified for jobs in Dubai. However, these youths have to pay about $1,000 for their visa, air ticket plus other costs. Only 50 out of 200 candidates who qualified could raise the money.

Notice that the 150 who cannot be taken are not lacking money but financial inter-mediation. They do not need to have the $1,000 in advance. Their job/salary provides future streams of income from which they can pay for the fees for processing their travel to Dubai. Many individuals and firms can loan them that money if they are assured of being paid back. For example, each of these candidates can get a loan of $1,000 payable at a rate of $100 per month for one year. That would amount to $1,200 in a year – a 20% rate of return on capital for the lender.

I have actually helped a few young people with this kind of loan, and all of them have paid me back with this interest. So why do banks and other money lenders not rush to this opportunity, which from my experience works? The issue is trust! Lenders do not have a guarantee that these borrowers will pay back. In fact, as Mukasa told me, Ugandans have “lugezigezi.” When they reach Dubai, they can change their mind and refuse to pay back. The law in Dubai protects such behaviour. How?

Ideally, candidates can enter an agreement with their employer to deduct the $100 per month from their salary to repay the loan. This would allow banks and other money lenders to issue the loans. However, to avoid “exploitation” or “abuse” of workers (in fact because of complaints from Uganda’s veritable parliament) the government of Dubai passed a law prohibiting employers from deducting money from their employees’ salaries even if it is with the consent of the employee.

The Dubai law came to protect Ugandan workers from being abused and exploited by employers, which was good. But soon it became an opportunity for Ugandans to shack their responsibility to pay back loans, by appealing to the government of Dubai. The few who made these complaints spoilt for the many that would be willing to have their wages deducted. The challenge is to find a way to assure capital holders that their loans would be repaid with interest within agreed time.

One way to solve this is to insist that successful candidates bring collateral. This can be in form of land. But people can forge titles or mortgage family land in dispute. This means the lender must establish an elaborate mechanism to verify the authenticity of titles, establish the actual land size (using land surveyors) and value the land (by hiring property valuers). This becomes even more cumbersome because the borrowers are poor, don’t have titles and their land is in slums or villages making selling it in the event of default, a difficult task.

All this creates high transaction costs, which includes building an expansive and tedious bureaucracy in which few are willing to invest. But how come I have succeeded in the very few cases when I have tried? The young people I have helped were mentees whom I had known personally and a relationship of trust evolved between us. I also know their parents who were grateful I helped. This web of social ties creates a bond of trust few would be willing to break, except at the cost of embarrassing their families (how can you betray someone who helped you).

Thus, outside of these close personal and family relationships that creates micro pockets of trust, we do not have institutions that can do this on a large scale. In societies where trust is macro or where there are well developed institutions to cushion lenders in the event of default, so many of the unemployed youths would be getting jobs abroad and sending home remittances that not only increase household income but also earn the nation large amounts of foreign exchange.

This lack of trust within our societies also makes it difficult for our people to do joint ventures, build successful business partnerships or erect impersonal businesses where the managers are not family members. It explains why the only large impersonal businesses are multinational corporations. The other large and successful businesses are Indian capital where community trust is higher among its members.

Yet trust is often ignored in academic and journalistic debates. Perhaps this is because it is difficult to measure – for example in the way we can measure years spent in school, timeliness of reporting for work (work ethics) and labour productivity (output per unit labour input). I guess the difficulty in measuring trust prevents academics from making it a central fulcrum of their analysis of the drivers of prosperity.

****
amwenda@independent.co.ug

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Unknown said...

Dear Customers,

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TANG ADAM said...


We offer Cash & Asset Backed Financial Instruments such as Bank Guarantee and Standby Letter of Credit (BG/SBLC) for lease and sale, and loan facilities. We offer Verifiable Bank Instruments via SWIFT from genuine providers capable of taking up time bound transactions. Issuance is by AA rated Bank in Europe, Middle East, Asia and USA.

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WRIGHT said...

We are direct providers of Fresh Cut BG, SBLC, DTC IPIP, MT103/202 GPI CASH TRANSFER and MTN which are specifically for lease, our bank instrument can be engage in PPP Trading, Discounting, signature project (s) such as Aviation, Agriculture, Petroleum, Telecommunication, construction of Dams, Bridges, Real Estate and all kind of projects. We do not have any broker chain in our offer or get involved in chauffer driven offers.

We deliver with time and precision as sethforth in the agreement. Our terms and Conditions are reasonable, below is our instrument description.

The procedure is very simple; the instrument will be reserved on euro clear to be verified by your bank, after verification an arrangement will be made for necessary bank documents and stock testing expenses, the cost of the Bank Guarantee will be paid after the delivery of the MT760,

DESCRIPTION OF INSTRUMENTS:

1. Instrument: Bank Guarantee (BG/SBLC) (Appendix A)
2. Total Face Value: Eur 5M MIN and Eur 10B MAX (Ten Billion USD).
3. Issuing Bank: HSBC Bank London, Credit Suisse and Deutsche Bank Frankfurt.
4. Age: One Year, One Month
5. Leasing Price: 6% of Face Value plus 2% commission fees to brokers.
6. Delivery: Bank to Bank swift.
7. Payment: MT-103 or MT760
8. Hard Copy: Bonded Courier within 7 banking days.

We are ready to close leasing with any interested client in few banking days, if interested do not hesitate to contact me direct. Email: wrightjames931@gmail.com

Regards,
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We Offer Lease and Purchase BG,SBLC,DTC IPIP, MT103/202 GPI CASH TRANSFER AND MTN

WRIGHT said...

Finding a genuine provider of financial instrument is very challenging but we are certified Financial Instrument providers in United Kingdom. Presently, we only focus on BG/SBLC,DTC IPIP, MT103/202 GPI CASH TRANSFER, MTN, LOAN for Lease and Sale transactions. However, our Lease BG/SBLC is 6+2% and Sale at 40+2%.

Should you find this interesting and acceptable? Kindly, contact us and we shall review and respond with draft Contract/MOU within 48hrs maximum.

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flourish loan said...


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Unknown said...

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WE OFFER ALL KIND OF LOANS - APPLY FOR AFFORDABLE LOANS said...

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Unknown said...

Hello, I am Mohammedi Miah by name and I want to testify to a good lender who has loaned me a loan of $490,000.00, after being cheated by several international internet financiers, everyone promises to give me a loan after I have been forced to pay a lot of costs that are worthless or a loan Loan No positive result. Until I met a witness who was also scammed and eventually connected to a legitimate loan company called Standard Online Finance Company Limited, where he finally got his loan, so I decided to contact him Loan Company and all they assured me was that I would not cry more because I would get my loan from their company and I would follow them when they reported my surprise. They gave me a loan of $490,000.00 For more information about their services Email: standardonlineinvestment@gmail.com

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Debt consolidation loan
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WE OFFER ALL KIND OF LOANS - APPLY FOR AFFORDABLE LOANS said...

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Cucina Finance (UK) Limited provides personal loans/business loans/trade finance/import & export loans/project loans to companies of all sizes ranging from individuals, companies and trader's globally. Just one simple process, We make financing the growth of your business simple, transparent, and fair.


No jargon, no hidden fees
Simple approval process
Fast business loans funded in just 2-3 business days
Low Interest rate of 2%
Companies can be profitable or have negative net income
Prior bankruptcies accepted
Zero credit checks required
Individuals with Bad credit can apply
Flexible repayment schedules
CIS & KYC required for all loan applicant irrespective of location/country
Loan Duration from 1 year - 20 years maximum
Grace period of 12 - 24 months for large business loans/working capital
Loan Funding/Financing is not limited to any geographical location or country whatsoever


We build just the right financing for each client, with simple paperwork, quick approvals, and flexible payment schedules. For further details, Kindly contact us via email, telephone, Skype. Intermediaries/Consultants/Brokers are welcome to bring their clients and are 100% protected. In complete confidence, we will work together for the benefits of all parties involved, Looking forward to rendering the best of our services to all esteemed clientele globally.


Cucina Finance (UK) Limited
Website: https://cucinafinance.com
Email: finance@cucinafinance.com
Tel: +44 (123) 388-5014
Whatsapp: +44 7425-381661
Enterprise House, Eureka Business Park,
Ashford, Kent, TN25 4AG United Kingdom
Company Registration No. 02587815

Anonymous said...

Cucina Finance (UK) Limited provides personal loans/business loans/trade finance/import & export loans/project loans to companies of all sizes ranging from individuals, companies and trader's globally. Just one simple process, We make financing the growth of your business simple, transparent, and fair.


No jargon, no hidden fees
Simple approval process
Fast business loans funded in just 2-3 business days
Low Interest rate of 2%
Companies can be profitable or have negative net income
Prior bankruptcies accepted
Zero credit checks required
Individuals with Bad credit can apply
Flexible repayment schedules
CIS & KYC required for all loan applicant irrespective of location/country
Loan Duration from 1 year - 20 years maximum
Grace period of 12 - 24 months for large business loans/working capital
Loan Funding/Financing is not limited to any geographical location or country whatsoever


We build just the right financing for each client, with simple paperwork, quick approvals, and flexible payment schedules. For further details, Kindly contact us via email, telephone, Skype. Intermediaries/Consultants/Brokers are welcome to bring their clients and are 100% protected. In complete confidence, we will work together for the benefits of all parties involved, Looking forward to rendering the best of our services to all esteemed clientele globally.


Cucina Finance (UK) Limited
Website: https://cucinafinance.com
Email: finance@cucinafinance.com
Tel: +44 (123) 388-5014
Whatsapp: +44 7425-381661
Enterprise House, Eureka Business Park,
Ashford, Kent, TN25 4AG United Kingdom
Company Registration No. 02587815

Anonymous said...

Cucina Finance (UK) Limited provides personal loans/business loans/trade finance/import & export loans/project loans to companies of all sizes ranging from individuals, companies and trader's globally. Just one simple process, We make financing the growth of your business simple, transparent, and fair.


No jargon, no hidden fees
Simple approval process
Fast business loans funded in just 2-3 business days
Low Interest rate of 2%
Companies can be profitable or have negative net income
Prior bankruptcies accepted
Zero credit checks required
Individuals with Bad credit can apply
Flexible repayment schedules
CIS & KYC required for all loan applicant irrespective of location/country
Loan Duration from 1 year - 20 years maximum
Grace period of 12 - 24 months for large business loans/working capital
Loan Funding/Financing is not limited to any geographical location or country whatsoever


We build just the right financing for each client, with simple paperwork, quick approvals, and flexible payment schedules. For further details, Kindly contact us via email, telephone, Skype. Intermediaries/Consultants/Brokers are welcome to bring their clients and are 100% protected. In complete confidence, we will work together for the benefits of all parties involved, Looking forward to rendering the best of our services to all esteemed clientele globally.


Cucina Finance (UK) Limited
Website: https://cucinafinance.com
Email: finance@cucinafinance.com
Tel: +44 (123) 388-5014
Whatsapp: +44 7425-381661
Enterprise House, Eureka Business Park,
Ashford, Kent, TN25 4AG United Kingdom
Company Registration No. 02587815

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Veronica Cooper said...

Hordle Finance B.V (UK) Limited provides personal loans/business loans/trade finance/import & export loans/project loans to companies of all sizes ranging from individuals, companies and trader's globally. Just one simple process, We make financing your business growth simple, transparent, and fair.


No hidden fees or surprises
Simple approval process
Fast business loans funded in just 2-3 business days
Low Interest rate of 2%
Previous Bankruptcies accepted
No credit checks/collateral required
Flexible repayment schedules
Client information sheet & KYC required for all loan applicant irrespective of location/country
Loan Duration from 1 year - 20 years maximum
Grace period of 12 - 24 months for large business loans/working capital
Funding/Financing is not restricted to any geographical location or country


Simple paperwork, quick approvals, and flexible repayment schedules. For further details, contact us via email, telephone, Skype. Intermediaries/Consultants/Brokers are welcome onboard bring their clients and work with us and are 100% protected adequately protected. In complete confidence, We shall work together for the benefits of all parties involved, Looking forward to rendering the best of our services to all esteemed clientele globally.


Hordle Finance B.V
Website: https://www.hordlefinance.com/
Email: finance@hordlefinance.com
Tel: +44 2038-076-070
Whatsapp: ++44 7901-191-353
ONE BANK STREET, CANARY WHARF,
41 Tower Hill, LONDON, GB-LND E14 4SG
Company Registration No. FC029166

Veronica Cooper said...

Hordle Finance B.V (UK) Limited provides personal loans/business loans/trade finance/import & export loans/project loans to companies of all sizes ranging from individuals, companies and trader's globally. Just one simple process, We make financing your business growth simple, transparent, and fair.


No hidden fees or surprises
Simple approval process
Fast business loans funded in just 2-3 business days
Low Interest rate of 2%
Previous Bankruptcies accepted
No credit checks/collateral required
Flexible repayment schedules
Client information sheet & KYC required for all loan applicant irrespective of location/country
Loan Duration from 1 year - 20 years maximum
Grace period of 12 - 24 months for large business loans/working capital
Funding/Financing is not restricted to any geographical location or country


Simple paperwork, quick approvals, and flexible repayment schedules. For further details, contact us via email, telephone, Skype. Intermediaries/Consultants/Brokers are welcome onboard bring their clients and work with us and are 100% protected adequately protected. In complete confidence, We shall work together for the benefits of all parties involved, Looking forward to rendering the best of our services to all esteemed clientele globally.


Hordle Finance B.V
Website: https://www.hordlefinance.com/
Email: finance@hordlefinance.com
Tel: +44 2038-076-070
Whatsapp: ++44 7901-191-353
ONE BANK STREET, CANARY WHARF,
41 Tower Hill, LONDON, GB-LND E14 4SG
Company Registration No. FC029166