What are ABL’s growth and development plans?
MAYANJA: ABL’s imminent objective is to increase its footprint in Sub-Saharan Africa. We now have representatives in the Ivory Coast and Mozambique, but we are most prevalent in Uganda, where we are looking to make that footprint grow. On the production and the business line side, project finance is increasingly becoming an area of focus for us, because most of the African countries have an infrastructural deficit. Yet in some areas, the construction companies in charge of building infrastructure are facing lesser demand due to the slowdown in the global economy. So you may find that construction companies in Dubai may now be better off being in Sub-Saharan Africa. Usually, however, these companies have problems trying to find their way in this kind of environment. So this is where we would come in, providing them with the necessary information as well as helping the African governments to structure the way they deal with these companies. Corporate finance is still an area which we are watching closely. African companies need to grow, and they need capital. In order for them to tap into the international market, they need our services. We help companies comply with the corporate governance requirements, so that they are able to attract capital from international funds. With regards to principal investments, we are looking closely at Islamic finance as an area in which we could potentially invest.
How successful has the launch of the ABL Private Exchange (ABLX) been?
MAYANJA: The take up of ABLX has been slow. We have had many opportunities and a lot of inquiries but capital commitments have been slow, and we do not know whether this is due to the current squeeze in the market, or to the turmoil experienced in the global economy. ABL Private Exchange is also a very new concept in Africa. So the take up from local investors and institutional investors has been slow too. We do have some good opportunities in that area. In particular, I would like to mention a venture capital opportunity, where a gateway to integrate credit card payments and mobile payments was developed. With this new innovation, a person will be able to purchase anything from anywhere in the world. As you may be aware, the credit card penetration in Africa is still very low, whereas the mobile phone penetration is quite high and growing rapidly. Yet, you may find that whoever wants to make a purchase transaction in Africa, will find the cash system very difficult. Therefore, we consider this new opportunity totally feasible and ABL Associates expects more people to invest into it.
Which Sharia compliant investments do you find more interesting?
MAYANJA: The Sharia compliant investment that I currently find most interesting is not very common. In Africa, we have some pension funds now, but they are the usual investors, investing in conventional assets. However, Muslims are beginning to ask whether these pension funds can be allowed to invest in Sharia compliant assets. On the advisory side, there are already assets that can be invested in Sharia compliant instruments, but in the banking sector, most African countries are still developing their legal framework. ABL Associates is looking in particular at microfinance, because most Africans are not yet rich enough to access conventional banks. So if you look at the bottom of the pyramid, the current opportunities lie with Islamic microfinance.
How does Islamic finance in Uganda differ from conventional finance?
MAYANJA: The Islamic banking sector in Uganda is up and coming. The legislation has just reached the level of the cabinet. Thus, the process will take some time. Conventional finance, on the other hand, is pretty much well established, apart from a few areas in the capital markets and derivatives. Islamic finance is something that the population of Uganda is looking forward to having. Some interest has also been expressed by some Islamic banks that are waiting for the law to enter into force, and by some conventional banks, that have some Islamic banking windows already in place in the market. The prospects are good because Muslims are about 12% of the population, which represents a market size of about 3m people. In terms of economic values, Muslims are traders and businessmen, so there is room for growth in the Islamic banking sector. Obviously, the conventional banking sector is still dominant and will remain so for some time.
Africa represents a large market for finished goods. But, at the same time, it is important for other countries to secure their raw materials from Africa. China is already doing so and South East Asia will follow. It is not always a negative thing to import raw materials from Africa because, at the end of the day, this still represents revenue for Africans.
Where do you see opportunities for increased business partnerships and collaborations between Uganda and South East Asia?
MAYANJA: Obviously, Africa will be a commodities supplier for some time. There are plenty of good opportunities in Africa for companies who have expertise in mining, and in the oil and gas sector. However, we still need to produce more energy than we have right now, and, under this profile, utility companies in Asia, or in South East Asia, have not been proactive in seizing opportunities. You can see a lot of Africans coming into South East Asia, as there is some soft export, such as education. However, Africa still needs to be given fair market entry terms for some of its products in order to adequately compete with the majority of the developing countries in the South East Asian markets. Africa represents a large market for finished goods. But, at the same time, it is important for other countries to secure their raw materials from Africa. China is already doing so and South East Asia will follow. It is not always a negative thing to import raw materials from Africa, because, at the end of the day, this still represents revenue for Africans.