Cooperators Challenged To Go Digital

UGANDA – Cooperators have been challenged to go digital in order to overcome any unanticipated challenges similar to what the Covid-19  pandemic has done to the business sector in Uganda.

This was revealed on Tuesday during the virtual zoom meeting organized by Uganda Cooperatives Savings and Credit Union (UCSCU) to check on how its primary cooperatives are performing despite the Covid-19 pandemic.

Dr Sylvester Ndiroramukama, Chief Executive Officer (CEO), Uganda Co-operatives Savings and Credit Union (UCSCU), encouraged SACCO heads to adopt digitalisation to run cooperatives rather than waiting for Covid-19 to come to an end for physical activities to continue.

“As SACCOs, we need to innovate so that we are able to serve our members at the union level. At the union, we have redefined some new products that you can put to use. One of them is Management Information System (MIS), the accounting software because of the high default rate in SACCOs as a result of the pandemic,” Ndiroramukama explains.

“We also had to look at some other partners to solve the issue of loan defaults and that is how we came up with GnuGrid which is a provider of credit reference services that is duly licensed by Bank of Uganda,” he added.

The meeting attended by dozens of cooperatives’ leaders from the different regions also extracted measures and opportunities that  Covid-19 has brought  to cooperatives in Uganda.

According to Muzaffar Kinalwa, the Information Communication and Technology (ICT) Manager at UCSCU, this was the third of its kind and more weekly meetings will be held by UCSCU on cooperative identity and information sharing to serve its primary members.

Rita Nansitu-General Manager Sao Zirobwe SACCO embarked on M-SACCO application which enabled them to run cooperative affairs normally without the Covid-19 hinderances during the first & second lockdown.

“M-SACCO came on market in the last quarter of 2018 and its uptake has been low but ever since the Covid-19 lockdown, many people have subscribed as one of the strategies of accessing our services,” said Nansitu.

“People can save, withdraw and pay their loans using the system at a much lower cost and excluding themselves from physical contacts that puts them at risk of getting infected with Covid-19,” says Nansitu.

She adds that the SACCO’s resilience to keep operating despite the  Covid-19 challenges has built confidence and trust to increase on their savings.

“During the first lockdown in March 2020, members rushed to pick their money thinking that maybe we are going to close but the fact that we kept operating, the persistence has guaranteed our members who had withdrawn their money to resave with us and our savings have grown tremendously despite the pandemic,” Nansitu explains.

However, she says that the SACCO’s annual work plan slowed down as a result of Covid-19 as loan disbursement was not achieved as budgeted.

“We had targets within our annual work plan but most of them have been disrupted. For instance, our loan portfolio disbursement was greatly affected because we could not continue giving loans yet most of our members were defaulting,” says Nansitu.

“For the very first time, we realized an increase in loan default rates because of closure of businesses. We also registered a reduction in savings. Even those who had  little savings had to come for them to stock food such that they can survive the uncertainty of Covid-19,” adds Angella Nabatanzi, the Branch Manager ,Wakiso Self Help SACCO.

She also said, the SACCO suffered some expenditures as it went ahead to support some of the vulnerable members in the community.

“We also realized an increase in expenditure as we had to stick to our principle of supporting our clients through the hard times,” says Nabatanzi.

Contrary to urban SACCOs, Patrick Dramadri, the General Manager Oleba SACCO says Covid-19 came by surprise but the SACCO has continued to register a dramatic increase in both savings and membership.

“As opposed to urban SACCOs where they experienced withdraws, on our side which is rural based, our saving portfolio has shoot up while the membership is also getting high,” says Dramadri.

Oleba is a small but steady growing SACCO in West Nile with a total savings of Shs 513million, loan portfolio of Shs 487million and a membership base of 2,300.

Also, Henry Indema, General Manager Moyo SACCO says the institution has registered an increase in savings during the Covid-19 pandemic.

“To our surprise, savings have increased because most of the money which is supposed to be invested in businesses is now in savings and also an increase in membership because we realized that more people are coming to register within this period of Covid-19 meaning that the pandemic has taught the community how to save for the future,” Indema explained.

However, Indema says this never stopped some of the institution’s credit products from losing market.

“There is a reduction in demand for loan products such as school fees loans as a result of closure of schools during the pandemic,” he revealed.

He adds that SACCOs are also suffering with unclear government communication on loans and repayment by clients.

“Most clients have taken the communication from the president that they are not supposed to pay the loans and this has affected the quality of loan recoveries as many have adamantly refused to pay,” Indema said.

Dicky Byamukama, General Manager Lyamujungu SACCO used the virtual platform to narrate how he survived Covid-19 in the month of June 2021.

“I must confess that I am a survivor of this pandemic and I remember when I was in self isolation for 14 days, I tried by all means to keep it to myself so that the business is not affected but the problem of stigma could not hold,” Byamukama testifies about his experience at the sick bay.

He says his contraction of the novel Covid-19 never spared the institution as members got frightened from accessing financial services directly from the SACCO.

“I don’t know how it leaked to members and they started spreading rumours that all Lyamujungu staff had contracted the disease yet it was only me. This information discouraged SACCO members from doing aggressive savings because of the stigma effect,” Byamukama emphasized.

He adds that the suspension of specific businesses like churches and schools also affected the performance of SACCOs.

“Churches are still closed meaning that church goers can no longer attend services yet we had given loans to some churches and teachers as our pertinent clients and now they cannot meet their repayment schedule,” Byamukama said.

Despite the pandemic, Byamukama says Lyamujungu SACCO has also managed to increase members’ savings.

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“During the pandemic we registered an increase in savings to an extent that we have some fixed deposits with other commercial banks because people are no longer taking money for investment but only saving,” says Byamukama.

Lyamujungu SACCO is one of the oldest SACCOs in Uganda that started its operations in 1984. It has a total membership of 23,000 members, savings of more than shs 4billion and loan portfolio of over shs 8billion.

Solutions to Covid-19

Nansitu advised cooperatives to reduce the expenses and pay attention to only inevitable expenses.

For Nabatanza, she asked SACCO leaders to restructure member loans to amounts deemed affordable to them for payment.

“You also need to restrict the lending and emphasize that disbursement is only done to members with businesses which are still operating,” she advised.

Nabatanza also encouraged SACCOs to sensitize their members about business diversification

“Engage members to start up small capital businesses that require minimal capital enabling them to cater for their families and also make small payments to service their loans,” she further explained.

Indema advised cooperatives to focus on investment rather than savings.

“This is a period of investment in short term loans, a period of investment in mobilizing fair capital from the community. It is a period of sensitizing our clients and a time of giving them massive financial literacy education so that the community and the client would be in position to know what they are supposed to do,” Indema explained.

“If we are to do that, we shall continue to have more clients, more savings and more capital but if we are not doing that, I am sure most SACCOs are going to close because savings is a long-term liability,” he said.

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