Nelson Kituuka, the MD of Card Pesa approaches business with a straightforward philosophy: “If you can finance your business 100%, you are not maximizing the capacity of your business. You are not exerting yourself. You should be able to sell more than you can produce. And to be able to sell more than you produce you must have somebody who will lend you that money.”
A study by Makerere University’s College of Business and Management Sciences carried out on Small and Medium Enterprises in Kampala points out that while SMEs are able to access credit financing, it is often from the informal sector – they struggle to access credit financing from the formal sector because of stringent requirements like audited books of accounts, which these businesses often lack, and collateral.
Card Pesa has emerged as a digital credit financing company claiming a significant stake in a marketplace that has a huge demand for credit financing.
And the company does this without asking its clients for collateral. A closer look at how their business model works is needed to contextualize this revelation.
The reason for the huge demand for credit financing in Uganda is straightforward: Uganda is listed by various indices, including the World Bank, as the global leader in terms of per capita participation in entrepreneurial activity. In layman’s speak, almost everyone has a hustle: a business or a side business that offers them a means of bolstering their income, if they are employed anyway, or that they actually depend on.
The banking sector is almost comically timid about credit financing, and offers terms that are simply not practical to the small and medium enterprise sector and thus make it impossible for SMEs to access credit financing, or business loans.
Card Pesa MD Nelson Kituuka says he spotted a gap, a service that was lacking, and turned his attention to resolving it. He is particularly passionate about the SME sector, and views himself as a long-term participant within this sector.
“As a businessman I had tried to acquire loans from banks before. But banks have polices imposed on them that make the terms on which they offer loans to you impossible. You are looking for UGX10 million to service an invoice, and you are asked to bring a land title, with valuation of at least UGX50 million. And I thought to myself, “Why would I be looking for a UGX10 million if I have land worth UGX50 million?”
I cut short Nelson’s diatribe – I suspected that if I let him, he can turn this into an eloquent sermon.
Entrepreneurship 101 puts forward four tenets:
- Identifying a need, and responding to it with a good or a service
- Offering a unique proposition in delivery of this good or service
- Bolstering these two aspects with a passion for the area where you would like to implement your entrepreneurial activity.
- The importance of Scaling.
Nelson had already identified the need after his experience with banks as a young entrepreneur. He dabbled in various businesses, encouraged by his father, who once gave him what he believes is the greatest advice he has ever received: “Sell groundnuts. If you are able to scale this as a business, you can make a fortune.”
Armed with a Bachelor’s Degree in Commerce, he entered the corporate jungle of concrete and glass, joining Ernst and Young for one and a half years, before leaving to join Deloitte and Touché, where he remained for another one and a half years.
Our parents know us better than ourselves, because before long, Nelson quit to become self-employed, with his eye on procurement. His focus was acquisition of items brought in from outside the country, which he would then release into the market place with a considerable mark up. He started with men’s accessories, like cufflinks, luxury watches and phones, before moving on to cars.
He may not have taken on his father’s idea about selling groundnuts, but his old man certainly understood what Nelson seemed to have a knack for.
On May 6th, 2012, Nelson, attracted by the Personal Data marketplace, opened a company called Discount Cards that dabbled in producing corporate IDs. The firm flourished as they specialized in creating IDs for various institutions – schools, hospitals, the works.
Throughout his 20-year entrepreneurship journey, Nelson had never managed to get a business loan from a bank, even as he flourished. And it was this personal experience with the lack of access to credit as a businessman that pointed out to him this painfully obvious niche, and the business opportunity it offered.
A friend first approached him about the idea of creating a credit finance firm with boda bodas as its core clientele. The riders form an intriguing demographic – defined cash flow, with a strong communal bond and semi-formal organizational structures. Convinced, he opened Card Pesa in May 2019.
His background in acquiring data while producing corporate IDs was particularly useful in collating the information needed to verify whether a potential client was a worthwhile prospect, and in mitigating risk. And alongside this, he started digitizing the service and its backend operations. It considerably lightened the administrative costs of the business while also improving data retention. However, digitization had one drawback: his core clientele, boda bodas, were sometimes not comfortable filling out digital forms and often some of them did not have the smart phones that were often the most practical way of going about this.
To find a way around this, the firm soon expanded its core clientele, to include friends and family. He tapped into his network, and as a King’s College Budo alumni, this helped significantly to tap into the benefits of digitization. Card Pesa was diversifying its client base, with one important aspect – it would lend clientele 30% of their demonstrable income.
The firm has a healthy portfolio with over 500 clients. This portfolio is built around a client base that is acquired through recommendations from their networks, as a form of guarantee, and the capacity for demonstrable income on the part of the person seeking the loan. At any one time in its current operations, the firm is handling 200 loans.
Card Pesa loans do NOT require collateral, skipping around this particularly cumbersome mechanism by a process backed by data. Proof of identification is needed, as is support of your own networks in terms of a guarantee, and proof of income, against which you are given up to 30%.
Nelson broke down further how this works.
“We base our lending on proof of identity biographics ( ability to contract) whether someone has demonstrable economic activity that they are engaged in and whether the person has social links (references) in the locale where he says he resides and or works. For example, we will look at your bank statement or your mobile money statement, as part of our assessment process.”
This process is also backed by information the company can get with regards to various sectors they finance and pick up data on.
Which brings us to another core question: how does he finance the business? He uses his own funds, while also investing funds from interested business colleagues who approach him for what they regard as a healthy way of earning a profit.
And how does someone access Card Pesa services?
Here, he lines things up, ticking them off from his hands, gesturing.
“First, you need to sign up for our services via www.cardpesa.com/signup. Then, you use our USSD platform *217*260# from which you can borrow and repay instantaneously based on a preset 30 day credit limit. It works like a credit card so if your limit is 100k and you take 10k within the initial 30 days you can come back for the balance until you exhaust your limit.
I&M Select Banking Sapphire Club wins “Best Innovation of the Year” at UMEAS 2025We can also make requests through our messaging apps and we send money by bank/telegraphic transfer to any account of your choosing. You then can pay using the USSD, using visa/mastercard/amex online or by POS. You can also pay by Airtel Pay, MomoPay and by bank transfer. We do not accept any cash payments and we do not provide any cash advances of any kind under any circumstances.”
Without collateral, doesn’t Card Pesa have a high default rate?
Like a good poker player, he holds his cards close to his chest as he answers this.
“We are not too keen in tracking the default rate as the timelines we use are short but in general the model can handle without flinching a default rate of 50% and still be operational.”
The collateral question still tugged at my mind. How does Card Pesa make sure its clientele pay back?
“We believe that if a client sees value in the service we offer and also derives utility from using the platform they will pay if they can. So our role is to keep in constant communication with all our clients and thus are able to advise and help where we can, We have recovery mechanisms that are available to us like using auctioneers and court bailiffs and also using legal mechanisms to recover loans where clients are delinquent. But our biggest weapon is the use of references and guarantors and people who are linked to the delinquent clients on the platform who many a time will intercede for client so their record is not tarnished by a wayward associate.”
It sounds like the sort of business where one can get their fingers burnt. What would he say are some of the mistakes he has made or life lessons in business that he wants to warn people about?
Nelson’s brow furrows as he thinks back. I feel a list coming on.
“Always plan for scale from day one.
Always think big.
Start now, not tomorrow with what you have; do not procrastinate. ca
Build networks and build your reputation.
Mentor as many people as possible and don’t eat alone.
Make sure that as many people as possible derive utility and are part of the business so that there are many stakeholders who help you meet your goals.
Lastly, do your best today by putting one foot in front of the other meaning do just one thing everyday that takes the business forward.”
Wise words, you feel – some of them probably learnt the hard way.
Card Pesa’s thorough data collection process has helped them finesse their credit services, and the company has a healthy, growing portfolio that hasn’t even reached a tenth of its potential. It is the fact that the business model is so obviously scalable, that seems to excite Nelson the most.
“I am excited about the future, and where Card Pesa is growing. The future is digital, and we dominate that space already. But we are challenging the banking culture in this country, taking it head on because we offer an agile solution to credit financing. Do I see us evolving into a digital bank in the future? Certainly. We will prove the concept that Africans can be financed without collateral. We will have built a digital bank in Uganda. The need for credit is universal and like prostitution, it has been there since the begining of trade.”
The man is full of soundbites.
I had one more question for him, one that might not be as hypothetical as it might sound: if he met the President of the Republic of Uganda, Youweri Museveni –– for just five minutes – what would he say to him?
“Stop giving people money for free and make them learn how to borrow and pay it back, so that they can learn how to do enterprise.
A financial player has more skin in the success of peasants than those who provide them money for free with no mechanisms to get it back or scale it.
The government should start backing indeginous enterprise by backing indeginous financial institutions who look out for our people and try to make them earn more, instead of just buying treasury bills and bonds and using our NSSF money to lend their friends from back home.”
That ended on a scathing note.
From the perspective of Card Pesa, data, and indeed, record keeping is a critical part of doing business. This is particularly true for businesses that need to meet the criterion of ‘demonstrable income’. More importantly, a business that keeps records is able to carry out analysis, the sort of analysis that guides information on which aspects of the business improve the bottom line, and profits, where it is losing money, and how to improve the efficiency of its operations.
The efficacy of the Card Pesa business model is hard to dismiss – the company’s portfolio grew by 500% over the last two years, and with a re-opened economy, is set to grow even faster. Nelson has tapped into the tenets of entrepreneurship successfully, and finessed a business model that will have banks looking over their shoulders, one that is genuinely primed to redefine how the SME sector accesses financing.
Summary:
- Nelson Kituuka is the MD of Card Pesa
- Card Pesa loans do NOT require collateral
- Card Pesa will advance you a loan of up to 30% of your demonstrable income.
