Wazalendo builds loan insurance fund to protect members’ money
Lugazi, Uganda: The UPDF’s Wazalendo SACCO has started a Loan Protection Fund that will be used to hedge against the risks that come with loan defaults.
The Loan Protection Fund will be the scheme through which Wazalendo protects members savings in case of loan defaults, and is similar to the loans banks take out from insurance companies on borrowers savings.
Wazalendo’s board chairman Maj Gen Sam Kavuma says the fund will be used to reduce the risks that come with defaults.
“When our officers retire, the number reduces, similarly, when members desert, or when they die, the numbers reduces and the savings reduce. When someone deserts even without a loan, that affects the SACCO. Even when a member dies, that affects us in terms of savings.” Mr Kavuma says.
‘There will be no need to arrest the guarantors because someone has defaulted, his savings and the Loan Protection Fund will take care of his loan. We don’t even go after his family or rush to grab their properties because we created an internal insurance mechanism called Loan Protection Fund (LPF) to cater for this,” he adds.
Mr Kavuma says that they decided not to donate their money to the insurance companies and that is how the idea of the Loan Deposit Fund came about
“When you die or desert with our loan, even if its UGX 40m we don’t follow your family. Every member who borrows is charged 2% to cater for any eventualities. So whether a member has deserted or died, we don’t incur any loss.”
This was on the sidelines of the 13th Annual General Meeting of the Wazalendo SACCO in Lugazi. During this AGM, it was also revealed that the SACCO has so far disbursed upwards of UGX 890bn since 2007.
Mr Kavuma says that they will be doing monitoring and evaluation activities to ascertain exactly how this money has impacted on the members’ lives.
This AGM was attended by among others, the Chief of Defence Forces UPDF Gen. David Muhoozi who commended members for the work they have put in over the years. “We started small, grew strong and we are still strong,”.
Commenting on the Loan Deposit Fund, Ms Miriam Tusiimire, an advocacy and research advisor at the Uhuru Institute for Social Development applauded Wazalendo for their loan protection fund saying that other SACCOs in the country could learn from Wazalendo to reduce losses and expand services to the cooperators.
Wazalendo, the Uganda Peoples’ Defense Force (UPDF) SACCO is one of Uganda’s biggest SACCOs, it has 70,087 members currently and an asset base of over UGX 271.1bn. It provides an opportunity for the UPDF fraternity to come together and accumulate funds that will better their welfare and prepare them for life after retirement.
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