Sseguku Wiki

APR (Annual percentage rate)
APR (acronym for Annual Percentage Rate) is a value expressing the price of a loan making it possible to compare different loan offers though having different fees, payment intervals etc. The calculation of APR is explained in detail using this definition of APR This explanation is then again based on the definition given by the FCA.
Declining balance
Declining balance is a principle used when calculating loan interest. When using the declining balance principle interest is calculated using the current balance for the period. The interest in a given period is then smaller than the previous period because part of the principal has been paid from the previous repayment. Typically repayments are same amount but when using the declining balance principle the part of the repayment used for paying interest is declining while the part used for repaying the principal is increasing.
Default is a state of a loan where the borrrowers severely has breached the loan agreement. In Sseguku a loan is said to be defaulted when payments are late by 3 periods. When the loan enters the defaulted state we will start selling off the security pledged to us as part of the loan agreement.
Due diligence
Due diligence is the process carried out by the lender to validate that the borrower is capable of repaying the loan. Not only economic factors such as cash flow, loan security etc. are included in this evaluation but also current situation, personal character, attitudes etc. are considered.
Grace period

When we use the term grace period when defining loan conditions the grace period is a period before loan repayment starts. The length of the grace period is measured in a number of intervals defined by the loan repayment scheme. If repayments are weekly a grace period of 4 will mean 4 weeks. if repayments are monthly a grace period of 3 will mean 3 months.

Some investments provide returns immediately while other take some time before they provide returns. The shop buying goods for their store will have immediate returns from their sale while the farmer buying seeds will have to wait until the grain can be harvested and then sold. Therefore the shop keeper's loan does not have a grace period while the loan provided for the farmer has a grace period where repayments are not expected allowing the grain to mature.

Be aware that though there is no repayments during the grace period it is not free. The loan amount accumulates interest during the grace period. Repayments from a loan with a grace period will be slightly higher compared to a loan without grace period due to the interest accumulated during the grace period.

Lender's interest

The lender's interest rate is the term for the interest rate that the borrower pays to the lender for his loan. The rate indicates the annual interest rate.

When the lender determines the rate of submission of a bid, the lender should take into account a number of factors:

  • inflation in Uganda, which over the past 25 years has been approx. 6%, ie significantly higher than in Western Europe, where it is ½-1% in recent years.
  • cost of transferring money to Uganda which is about 2% but only when the money is transferred for the first time. When amounts repaid from other loans are re-lent, there is no cost as the money is already in Uganda
  • risk premium; Sseguku lends to small businesses with limited options to provide collateral for the amounts borrowed and although the borrowers in connection with group loans mutually guarantee each other, the lender must anticipate a certain amount of losses. Before the Corona pandemic, Sseguku had only losses on a few loans (about 2% of the amount lent), but during the corona pandemic, where business has largely been shut down, the share has risen to around 6%, but it is unknown to what extent the affected borrowers will be able to pay back when society in Uganda reopens.


Penalties are added to the loan principal when payments are late and clients are informed. This is part of all loan agreements that we enter. At the same time a new repayment plan is issued to handle the increased principal due to the added penalty and the interest accumulated in the period of the delay. Sseguku will aim for that the elaboration of the revised plan is done in cooperation with the client eventually to change the frequency af the payments and/or the term of the loan. All parties involved with the loan have an interest in that the remaining term is realistic and is progressing smoothly.

When a borrower is late with his payments, he must pay a penalty and there should be a new payment plan for the remaining loan process. This new payment plan prepared in accordance with the same principles as for a new loan. The amount due per. statement date fixed as the remaining debt after the last payment plus penalty and interest for the period from the last payment until the date of the statement.

Penalty fee amounts to 2% of the amount due at least UGX 10,000.

The client can in the preparation of the revised payment plan make an immediate debt payments and possibly change the repayment frequency and number of payments for the new plan (typically more frequent repayments of smaller amounts).

An example

Existing payment plan

Date Planned payments Actual payments
05/06/2015 UGX 356,000 UGX 356,000
05/07/2015 UGX 356,000 UGX 356,000
05/08/2015 UGX 356,000 [this payment is 19 days late]
05/09/2015 UGX 356,000
05/10/2015 UGX 356,000
05/11/2015 UGX 354,000

Statement Date


The amount due

Outstanding debt per. 05/07/2015 UGX 1,357,100
Penalty UGX 27,142
Interest (05/07/2015 - 24/08/2015) UGX 42,124,
Total UGX 1,426,366

Immediately Paid

UGX 200,000

Number of repayments and frequency of new payment plan

10 payments, paid biweekly

New payment plan

Date Planned payments Actual payments
05/06/2015 UGX 356,000 UGX 356,000
05/07/2015 UGX 356,000 UGX 356,000
24/08/2015 UGX 200,000 UGX 200,000
07/09/2015 UGX 122,000
21/09/2015 UGX 122,000
05/10/2015 UGX 122,000
19/10/2015 UGX 122,000
02/11/2015 UGX 122,000
16/11/2015 UGX 122,000
30/11/2015 UGX 122,000
14/12/2015 UGX 122,000
28/12/2015 UGX 114,000
Repayment interval
The repayment interval defines the number of days between each payment. Sseguku provides loan with weekly, biweekly (every 14 days) or monthly payments. This interval also defines how often interest is accummulated.