CBS PEWOSA SACCOs empower community growth and economic inclusion in Buganda: Part I

By H. Mulindwa Wamala

Meaning of SACCOs

The word SACCOs is meant to describe grassroots self-help organisations built on the principles of mutual understanding, group interest, and collective ownership. SACCOs is an acronym for “Savings and Credit Co-operative Society Organisations.” These are voluntary associations whose main function is to mobilise member savings into a pool of loanable funds, which the members can subsequently access to use for their different support purposes. 

Categorically, SACCOs are financial co-operatives, whose operations are intended to meet or improve the socio-economic welfare needs of both individuals and organised groups of people at the bottom of society.

How village banks turned into SACCOs

In Uganda, SACCOs started as village banks recently, but not before 2003, the year when the Bank of Uganda announced a country-wide ban on Village Banks.

SACCOs have a core mandate of mobilising savings and extending credit to their members. Responding to the Central Bank directive, the former village bank organisations were eventually transformed into mutually owned micro-credit co-operative societies, and finally got baptised “Savings and Credit Co-operative Societies”.

Growth of the SACCO movement

The growth and development of the SACCO movement in Uganda have been quite unprecedented, influenced by several factors, including improvements in economic infrastructure and several government bridging programme responses to poverty alleviation. In academia, wide research has been undertaken, and to date, there is a dynamic policy discourse ongoing. The SACCO regulatory regime in Uganda, too, has been shifting with respect to its growth. 

SACCOs are increasingly becoming an area of central focus for policymakers owing to their impact and humanitarian focus on deprived, disadvantaged, and marginalised population groups. That alone inspires scholars to investigate the causes of economic growth and development for people in both rural and poor urban communities. Quite a number of developing countries around the globe—Uganda is not alone in this respect—are faced with significant hardship to bridge market gaps and failures in financing growth-oriented activities, say agriculture and microbusinesses. The prevalence of such conditions not only degenerates into socio-economic exclusions but also widens the gap further and further,  subsequently holding down economic growth and poverty reduction. These conditions devastate the livelihoods of many people.

SACCOs provide local solutions to the above economic problems through financial intermediation. This is where a pool of voluntary individual savings is constituted into a fund to be loaned out to economically active proup members who need to support their businesses with additional funds or start up capital for new economic prospects. 

The need for financial inclusion

Financial inclusion is still a high policy priority in Uganda, which realizes the need for expanded and accelerated growth and economic inclusion for the masses. The middle-income status for the people of Uganda can be an absolute reality, without question or wishful debates.

Comparing Banks and MFIs with SACCOs

We all appreciate what Banks and Microfinance Finance Institutions (MFIs) do, but their services are still more rigid and highly structured around stringent conditions, specifically collateral requirements. Banks strictly chase profit, control risks, and seek optimal loan recoveries. 

Our society today largely seeks economic inclusivity and sustainable development despite having many restraints and obstacles for those seeking to improve their lives through access to finance without collateral. If adequate information can be collected about the citizenry, especially about their livelihood and means of sustenance, the condition of collateral, which acutely limits financial access, can be eliminated. Our government should invest in correcting and actualizing the national information system, in addition to strengthening its function and the system of legal performance. This will help increase public confidence in those dealing with people.

SACCOs offer savings flexibility; the use of member savings is based on the member’s discretion; savings can also be used for purposes extending to other basic livelihood-supporting pillars like health, education, employment, and asset ownership.  Indeed, in Buganda, many individuals and families benefit from the PEWOSA business model. MFIs and Banks can’t help, utmost because of their financing structural rigidities; they are also scared away by the costs of service delivery and the high risk that identifies poor communities, especially rural areas. 

Cooperative responses to problems faced by smallholder farmers

Agriculture is central to the lives of many people in Uganda, either directly or indirectly. Characteristically, low-value output, low production means, limitations of market access, and, diversified and segmented small farm holdings still haunt the sector. One of the solutions is a savvy financing approach that assists the majority of smallholder farmers, gives them access to quality inputs, adds value to their output, and deploys appropriate technologies. SACCOs and farmer co-operatives are best suited for this role if they get direct assistance from the government. 

This will directly eliminate the challenge where MFIs and Banks find it unproductive and costly to recover small loans in dispersed rural locations when dealing with low-income populations. The recent advances in the application of ICT-powered communication and financial operations can be looked at as a window of hope and opportunity, but the failure of the government to provide free internet as a universal human right shatters such hope. The majority of the poor who get rolled into membership of the SACCOs are landless, so to interpret, it means the absence of collateral. Illiteracy amongst adult individuals who are very economically active is surprisingly high,  implying those that do business have no records, rendering them a high risk for evaluation by financial institutions.

SACCOs are fundamentally designed to provide locally tailored solutions, like services that foster growth in income generation and employment opportunities, mitigating poverty’s escalating conditions. SACCOs suit local conditions and can be adapted easily. 

Habert Mulindwa Wamala is the Principal Trade and Co-operatives Officer, Kingdom of Buganda.

https://thecooperator.news/buganda-farmers-advised-on-fighting-deadly-black-coffee-twig-borer/

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