SACCOS: small money lifts ugandans out of poverty   By Joel Ogwang IT was not a political rally or a drama scene. It was not an immunisation/HIV testing clinic, either. Rather, it was a popular anti-poverty deliberation, as a multitude of Dwaniro villagers in Kiboga converged under a mango tree to ponder how to sustain the growth of their Savings and Credit Cooperative Society (SACCOS). Started in 2006 in response to the Bona Bagaggawale (prosperity for all programme), Dwaniro SACCO now boasts of sh13.4m in share capital and sh15.5m in savings. Membership fee is sh10,000, purchasing of two shares (sh20,000) and opening up an account sh6,000. To date, Dwaniro has disbursed sh95.4m in loans whose recovery rate is 80%, says Mathias Tumusiime, the board chairman. “Our membership increased from 214 in 2008 to 428 currently,” he says. “But we need more members.” In Mukono, Kasawo-Namuganga SACCO (KANASACCO) formed in 2005 prior to the launch of SACCOS under Bona Bagaggawale, boasts of 1,304 members in Kasawo, Seeta-Namuganga and Kimenyedde sub-counties. The SACCO gets loan funds from the Microfinance Support Centre (MSC), with 80% utilised for agriculture. The rest is commercial. Its share capital rose from sh46.5m up from sh5m, says Christopher Opala, the chairman. “We got a sh10m start-up loan in 2007,” he says. “We also received an additional sh50m.” In November, members of the parliamentary committee on finance, led by Charles Oleny Ojok, visited KANASACCO and were marvelled by what they saw. “This is a model SACCO,” said Ojok.   Other success stories South Mawokota SACCO in Mpigi. With 642 shareholders, it has a loan portfolio of sh185m and a share capital of sh14.1m. Members’ savings amount to sh58.2m.   Grace Najjuma, a member of a SACCO in Mukono, earns sh74m annually from her poultry farm The Uganda Prisons Service (UPS) SACCO with a membership of 3,000 Prisons warders and has a sh1b loan portfolio, says Dr. Johnson Byabashaija, the UPS commissioner general. “We lend three-times a member’s savings, with an interest rate of 1.25%,” he says. “This is one of the lowest rates anywhere in the country.” Courtesy of its frugal financial management, the SACCO got a sh2b funding boost recently. Amuru SACCO is mainly engaged in agricultural production, after leasing huge chunks of land in Acholi. It has a share capital of over sh3b, giving tractors to individual farmers. Even in areas like Karamoja, SACCOs are catching up, as well as the eastern and central regions. However, in Buganda, the performance of SACCOs is way below their potential, with coverage at only 40%.   Criticism When the Government rolled out the prosperity for all programme in 2006, there was stinging criticism and doubts on its success. Many thought the programme was just another government scheme to hoodwink Ugandans into joining the National Resistance Movement. The programme embodies four main pillars, namely production and productivity which encompasses NAADS, value addition and marketing, information systems at sub-county level and microfinance. But, a few years down the road, SACCOs proved their critics wrong, spearheading the fight against poverty. According to Ruth Nankabirwa, the microfinance state minister, the saving rate across the country has drastically gone up. “Once a SACCO has credible leadership and members feel they own it,” she says, “it will grow in membership and share capital.” Presently, a total of 700 SACCOS are fully registered with MSC. Each of the 1,085 sub-counties in the country, including municipalities, is supposed to have a SACCO. The Government also put in place a unit within the finance ministry to manage rural finance development. The Rural Financial Services Programme (RFSP) works with other institutions, including the Uganda Cooperative Savings and Credit Union (UCSCU), the governing body for SACCOs. Its main mandate is to develop a financial infrastructure for the SACCOS.   SACCO formation A minimum of 30 people are needed to set up a SACCO. However, whilst there are at least 1,000 inhabitants in each sub-county, few still hit the mark. For a SACCO to qualify, it should receive a letter of registration. A registration fee is paid, with members deciding on the amount. As soon as a SACCO is certified and its members trained by UCSCU, they are recommended for funding from MSC. The average membership fee for joining a SACCO should not exceed sh10,000. Role of UCSCU and MSC The Uganda Cooperatives Savings and Credit Union (UCSCU) was formed, is owned and controlled by the SACCOS, operating under the Uganda Cooperative Societies (UCS) Act 1991 and the Uganda Cooperative Societies Regulations of 1992. UCSCU’s mandate is to foster the organisation and development of SACCOS and to monitor their internal operations. Internally, UCSCU is regulated by its registered by-laws, policies and procedures. It offers demand-driven quality services to SACCOS for their growth and profitability. Currently, UCSCU is designated to implement the Rural Financial Services Programme (RFSP), a project funded by the International Fund for Agricultural Development (IFAD) through the World Bank. RFSP’s goal is to contribute to the Uganda Rural Services Strategy (RFSS) to enable all parts of Uganda access financial services. UCSCU. As the implementing partner for the RFSP, UCSCU underwent fundamental institutional and financial reorganisation. The Government also, through RFSP, charged UCSCU with training Ugandans on the formation and nurturing of SACCOs, paving the way for the Microfinance Support Centre (MSC) to release loan funds. Under a Memorandum of Understanding with UCSCU, the Government gives safes, calculators, filing cabinets, bicycles/motorcycles where need arises, training and refurbishing buildings. It also pays the salaries of the SACCOS manager, a cashier and a security guard for the first two years, says Yusuf Giduno, the RFSP spokesman. “This is to off-set the operation costs of SACCOS that could lead to increased interest rates,” he says. “It also boosts confidence in the members.”   Disbursement of funds The MSC has disbursed funds to over 300 SACCOS in the country and another 208 financial institutions. The Government has also released over sh50b to support agricultural production in rural areas, according to Dr. Specioza Wandira Kazibwe, the MSC chief. Starting this year, the funds will be given directly to the cooperatives instead of being released through microfinance institutions. Farmers will be encouraged to form cooperatives in order to access the money without giving any collateral. “We have realised that the funds have not been going to the rural poor engaged in agriculture,” Kazibwe says. “Our people have been hoodwinked for a long time, which is why we chose to deal with the farmers directly.” The monies will also be used to buy tractors, irrigation equipment and build food stores for farmers. To further boost the microfinance movement in the country, the Government is seeking parliamentary approval of sh220b. This money will be secured from the African Development Bank (ADB) and the Islamic Development Bank under the Rural Income and Employment Enhancement project, says Syda Bbumba, the finance minister. The scheme is intended to reduce poverty and facilitate access and utilisation of affordable financial and business development services for about 1.4 million Ugandans. However, any request for funding will be considered by MSC. “The Government has agreed with key players in the sector that its role in microfinance will remain at creating an enabling environment for sustainable growth,” she says.