Microfinance Institutions In Trouble In Kwania

KWANIA –In Kwania and Apac Northern districts Savings and Credit Co-operative Societies (SACCOs) have become the preferred go-to lenders threatening to lock out microfinance institutions.

The SACCOs are drawing in huge numbers of civil servants who ordinarily are clients of microfinance institutions.

SACCO leaders in the two districts have agreed to bolster the inter-SACCO lending market by lending and borrowing money from each other – thereby locking out microfinance institutions whose loans are considered ‘expensive.’

Under the new arrangement, 11-SACCOs in the two districts will run their own inter-SACCO market. They will be able to lend and borrow from each other at reasonable interest rates to offset their dire financial positions. 

Their proposed working arrangement has been forwarded to the Ministry of Trade, Industry and Cooperatives for legal advice.

Robert Odur, the Chairman Board of Directors of Ikwera SACCO in Kwania district, said the latest move is bound to put an end to the exploitative commercial relationship between civil servants and microfinance institutions, which is costly to many borrowers.

According to Odur, many civil servants are shunning the expensive microfinance loans.

“We want to create a forum through which SACCOs can interact. For example, if SACCO ‘A’ has a cash flow problem it should be able to access funding from SACCO ‘B’. It just allows SACCOs to team up and develop their capacity to serve their members. The current situation is that if your SACCO runs short of money the only place you can go to is the nearby SACCO to save civil servants from microfinance lending institutions,” Odur said in a recent interview.

Bazil Odongo, a livestock dealer and resident of Ololango Village in Apac district, said he borrowed Shs 25 million in October last year at an 8% interest rate from Acanpekun Credit and Cooperative Society in the district. Odongo said he has serviced the loan well and is making a lot of profit.

“Shs 25 million that I used to borrow from Platinum (microfinance) at an interest rate of 10% could earn me a profit of Shs 5 million, but when I opted to borrow the same amount from the SACCO, I started realizing a profit of Shs 10 million. That is why I am expanding my livestock business,” he said.

William Odoc, a teacher at Acungi primary school in Kwania district, said many teachers are turning to SACCOs.  

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He said microfinance institutions make unnecessary deductions on teachers’ salaries even after loans are repaid.

“It is better to acquire loans from SACCOs, it’s easy to access and repay unlike the microfinance lending institutions that are fond of making unnecessary deductions and chasing after defaulting customers,” he noted.

But Patrick Okullo, the manager Platinum Apac branch, dismissed as false claims that microfinance institutions make unnecessary deductions and chase after debtors. “In the financial year 2018/2020 our loan portfolio was at the tune of Shs 300 million, however, in the financial year 2019/2020 we realized a drop of up to Shs 180m, this is partly attributed to the Covid-19 pandemic. Although to some extent we think the coming up of SACCOs is equally doing us more harm,” he said.

Apac District Local Government currently has a total of six fully registered SACCOs with 1,512 Village Saving Lending Associations, (VSLA) and three Microfinance institutions that include; Brac, Platinum and, Bayport operating in the two districts of Apac and Kwania, with over 15,000 clients.

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