BoU readying to regulate big SACCOs, pledges to work with UCSCU

KAMPALA– The  Microfinance Deposit-Taking Institutions [Registered Societies] Regulations, 2022, will enable the Bank of Uganda [BoU] to license and supervise large SACCOs in the country as mandated under the Tier 4 Microfinance Institutions and Money Lenders Act, 2016.

According to BoU deputy governor, Michael Atingi-Ego, regulation will enhance the corporate governance practices of SACCOs and strengthen public confidence in the sector. “Hopefully, the poor governance that caused the loss of funds and threatened the sustainability of SACCOs will be relegated to the history books,” Ating-Ego.

Atingi-Ego said they expect that regulated and well-managed SACCOs will attract funds, including from development partners, and consolidate the support and trust of members.

“In addition, the enhanced capacity and richer resources will enable SACCOs to invest in effective systems and innovations, such as digital channels, to offer services at scale.”

Atingi-Echo was late last giving a keynote address at the Seventh Annual SACCO Conference held in Kampala and organised by Uganda Cooperatives Savings & Credit Union [ UCSCU ] under the theme, “Remodeling the SACCO Business Model for Inclusivity”.

The BoU, he said, is already implementing the National Payments Systems Act 2020 to promote broader financial service delivery through safe, sound, and regulated payment system providers and FinTech firms. ‘Embracing technology will enable SACCOs to improve service delivery at a potentially lower cost to customers.’

The adoption of digital technologies is essential to remodelling the SACCO business model for inclusivity due to the recent acceleration of access to mobile money accounts and the usage of digital payments, he said.

“Harnessing the digital economy will open up additional economic opportunities for SACCOs, including income generating activities, accessing new markets, and richer information for farming or business activities, he said, adding that digitalisation was considered a top strategic priority for 81 percent of the credit union associations surveyed by the World Council of Credit Unions in 2021.

According to him the regulation of SACCOs, payment service providers, and FinTechs will alleviate the constraining lack of access to payment systems, correspondent banking, microinsurance product offerings, and deposit insurance guarantees, which have held back the development of the sector until now.

Nationwide reliance on mobile phones offers a platform for SACCOs to build partnerships with mobile money providers to collect member savings, disburse loans, and enable members to make payments for various services cheaply and quickly, he said.

He urged SACCOs to analyse the data on the financial behaviour and capacity of members to inform the customisation and enrichment of the portfolio of products and services offered.

Working with development partners to explore opportunities

The BoU boss also urged the SACCOs to work with development partners that support innovation to explore the opportunities that remain untapped in areas such as providing affordable housing, health, and insurance services to members, especially those at the bottom of the economic pyramid.

Guarding against digitalisation and environmental risks

He urged SACCOs to beware of risks that come with digitalisation such as IT threats, including hardware and software failure; malware; viruses; spam, scams and phishing; and human error, as well as criminal IT threats, including hackers, fraud, password theft, denial-of-service, security breaches, and staff dishonesty. “Therefore, SACCOs must invest in robust IT systems, internal controls, and business resumption planning.”

He advised SACCOs to pursue sustainable investments and marshall their members to preserve the environment to combat climate risk.

Working with UCUSCU

He said, “The central bank is committed to working with UCUSCU, the Registrar of Cooperatives, the Uganda Microfinance Regulatory Authority, and stakeholders to uphold the spirit of cooperators as we evolve the SACCO business model to build an inclusive, equitable, and better world.”

He said being owned, governed and managed by their members distinguishes SACCOs from profit-driven financial institutions since SACCOs aim to improve the welfare of members.

SACCOs as a unique bond of social enterprise

With the cooperative movement accounting for about 13 percent of the Ugandan population, he said, SACCOs, which he said, possess a unique bond of social enterprise, hold enormous potential for driving national socio-economic transformation.

“It is no wonder that the growth of the cooperative movement in Uganda doubled to 21,346 registered cooperative societies as of February 2020, as reported by the International Cooperative Alliance, from 10,746 registered societies as of January 2011.”

Globally, Ating-Ego said, the 2021 statistical report by the World Council of Credit Unions notes that the credit unions and financial cooperatives sector comprises 87,914 credit unions in 118 countries with over 393,871,631 members and assets worth US$3.48 trillion.

In addition, he said, the report indicated that Uganda had 896 financial cooperatives with 1,002,530 members [about 2 percent of the population].

Moreover, he said, BoU’s data shows that members’ deposits stood at Shs 884.96 billion, while shares and other equity, as well as loans, amounted to Shs 865.6bln and Shs 1,471.63bln, respectively, as of 30 September 2022. “These figures demonstrate the enormous potential and significance of the sector to national economic and social development.”

He said SACCOs offer enormous prospects for broadening access to financial services to the underserved in remote areas across the country as indicated in the National Financial Inclusion Strategy 2017- 2022.

He said BoU amended the Microfinance Deposit-Taking Institutions Act 2003, allowing regulated institutions to offer agent banking, Islamic banking, and insurance services, among others, to enrich and ease financial service delivery closer to the people.

Wazalendo SACCO CEO Joseph Freddy Onata while addressing participants at the conference stressed the importance of branding. “Branding and rebranding [targeting the young] while addressing the information gaps is a prerequisite for SACCOs,” he said.

“The main reason why most people join SACCOs is to collectively deal with their welfare challenges,” he added.

Other presenters at the conference included Derick Nkajja CEO ICAPAU, Mercy Agaba Tumukunde CEO Steadfin SACCO, Joseph Mugume CEO EBO SACCO and Paul Luberenga Mugabi Board Member UCSCU.

Mugume urged Saccos to digitalise their services, saying that operating physical branches is not enough during in the current digital revolution.

“Do SACCOs need physical branches only for service delivery? No! It’s a hybrid solution of physical branches and branchless operations,” he said.

https://thecooperator.news/world-savings-day-bou-boss-urges-ugandans-to-save-for-the-future/

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