Doing business in Uganda

Everything's done by cash in Uganda. No stores take credit cards or checks. You pay water bills, buy appliances, and even pay rent by cash. That often means many bills with many zeros since $500 is equivalent to one million Uganda shillings.

No credit sounds like a good thing coming on the heels of the worldwide credit and financial crisis. As Americans, we're often reminded by the media that we save too little and put too much on our credit cards.

No credit has its downside, too. It adds a risk to doing business. We hired an electrician today to replace a breaker in our circuit board. (Our refrigerator had been out the past two days because it wasn't getting enough power. It's now running and we're delighted.) The electrician evaluated the problem and said he'd need to buy a breaker and it would run UGX 60,000 ($30). We paid him up front so he would have enough money to buy the parts. He returned a few hours later, successfully installed the parts, and we settled by paying UGX 30,000 for his labor.

That's typical; you pay businesses up front so that they can buy materials. The risk isn't great for a new breaker but it's significant when you're hiring a well drilling company at about $8,000 per well. You may not have to pay all $8,000 up front but would probably have to pay half. The company needs the money to buy the hand pump, purchase fuel, pay lodging, buy cement for grout, etc. They don't have a line of credit and so they purchase these things only after they are paid.

I heard more than one story about losses incurred because of this system. One group hired a well drilling company to install wells and everything went smoothly for the first two. They extended the contract for additional wells and the owner left town with $25,000. We're doing our best to avoid a similar results in working with the villages but as you can imagine, this group thought they were doing it right and they lost (and so did the people needing those wells). Pray for wisdom and God's grace to avoid this outcome.