Cooperatives & Communities

Govt will revive Cooperative Bank, says minister Bahati

KAMPALA– Government is in the initial stages of reviving the Cooperative Bank, according to State Minister for Trade, Industry and Cooperatives, David Bahati.

Bahati made the revelation in Kampala on Tuesday during a press conference on the status of his ministry’s implementation of the National Resistance Movement Manifesto 2021-2026.

The minister said government has come to learn that some businesses in the country cannot thrive on commercial bank loans as they are expensive.

“We have good news for the cooperatives and cooperative movement in this country. Cabinet requested the sector to write a paper, which we are finalizing and coming up with the mechanism to form a cooperative bank,” he said.

When established, the Cooperative Bank is expected to enhance the availability of affordable financing to viable projects in agriculture and micro and medium scale enterprises development in the country.

The Cooperative Bank was established in 1964 under the Cooperative Societies Statute of 1963 but its assets were taken over by the Bank of Uganda in 1997 as it closed a different Cooperative Bank registered in 1997 under the Companies Act.

The reasons given for its closure of the bank were “inadequate capitalization” and “insolvency to the tune Shs 4.8 billion, as at 31 December 1998”. Further, media reports in indicated the bank’s collapse was as a result of the withdrawal of support by the United States Agency for International Development [USAID], and a case of fraud involving bank officials.

Government has provided a legal framework for the revival of the bank. Section 19 of the Cooperative Societies Amendment Act 2020 states that: There shall be a Cooperative Bank to serve the interests of the cooperative societies and individual members.

Bahati said they were in the process of debating the establishment of the bank and government would inject money into the project.

According to the Financial Institutions [Revision of Minimum Capital Requirements] Instrument 2022, a person proposing to transact in the financial institution business in the capacity of a bank should have a minimum paid-up capital of not less than Shs 120bln.

The instrument further provides that as of June 30, 2024, a person proposing to transact a financial institution business in the capacity of a bank shall have a minimum paid-up capital of not less than Shs 150bln.

In a recent interview with some cooperators, they said the establishment of the Cooperative Bank is long overdue, given that farmers under cooperatives are struggling to access loans from commercial banks.

For instance, Jackson Oyugi, the chairman of Wrest Acholi Cooperative Union says: “Commercial banks charge us high interest rates when we need loans from them. Even the loan application process itself is tedious. They [commercial banks] do not understand the cooperative business model. If we get our own bank, it will be a relief for us.”

The State Minister for Agriculture and Cooperatives in Buganda Kingdom, Hajji Hamis Kakomo says the bank needs to be rejuvenated to connect the missing link in the production chain. “We lack this bank and we cannot go very far as an agricultural economy without this bank [Cooperative Bank]…,” he says.

However, some leaders within the cooperative movement think that government has no business in establishing the Cooperative Bank. They argue that what is needed from government is providing a conducive regulatory environment for the cooperators to established their own bank to be supervised by the Bank of Uganda.

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