Thirteen years ago one man was introduced to saving at the grassroots. Today he is reaping substantial benefits from his local Sacco in western Uganda, writes ALON MWESIGWA.
For Patrick Mujuruzi, change has been a wonderful thing he can see, touch and feel. His modest home, perched on a hill in Rwamarembo village, Kyamuhunga sub-county, Bushenyi district, is encircled by coffee plantations, pigsties, and tea gardens.
“I had nothing a few years back,” the 42-year-old father of six said, pointing at the expanse of coffee trees he now owns.
Mujuruzi’s prospects brightened in 2004 when a friend convinced him to save with Kyamuhunga People’s Co-operative Savings and Credit Society Ltd, fondly called KYAPS by locals. Not long after, he became a candidate for a loan, he says.
“They gave me money which I used to buy land,” Mujuruzi said as he walked us through coffee trees.
“I have planted more than 10,000 trees of coffee. I have a business where I buy cows and sell at a profit. I pay school fees for my children,” he said.
“I started by borrowing Shs 250,000 but now they can give me all the money I want,” he added.
He has bought 204 shares worth Shs 2 million in the Sacco. Mujuruzi is one of KYAPS’ 23,765 members with joint savings of Shs 8 billion and a share capital of Shs 4.2 billion. It had a loan portfolio of Shs 12.7 billion by November 2017.
This story starts in 1998 with just two staff, Shs 3 million in savings and a few members. Led by Father Tomaino Paulino then, the religious foundation gradually won the trust of farmers who pooled resources. It has since opened four branches.
Joseph Bahame, the credit and management officer, said since they were surrounded by tea factories and farmers, the society was meant to serve them. “They give us business. We lend money to farmers to buy fertilisers, seeds and the factories pay their salaries through our Sacco,” Bahame said.
By the end of October 2017, KYAPS had given out Shs 82 billion in loans. This story gives new meaning to how a small start-up can turn around the lives of ordinary people. It also shows how Saccos are reaching the hitherto unbanked majority of Ugandans, or those who find big commercial banks unfriendly.
They are member-based financial institutions registered under the Cooperatives Act. Members agree to save money in a pool from which loans are extended to them at a reasonable rate.
Bank of Uganda has said Saccos serve people in rural areas who often lack access to mainstream financial service providers. Work-affiliated Saccos have also become common. And their biggest appeal is lending with little or no security.
Ian Rumanyika, a board member of the Shs 18 billion staff Sacco at Uganda Revenue Authority, told The Observer that for them, “it is about simplifying saving for staff.”
“We do not impose account maintenance fees on members’ savings but instead reward them,” he said.
Central bank estimates show that in 2011, Uganda had more than 2,094 Saccos. The number has grown to 5,000 in 2016, according to the ministry of Trade, Industry and Cooperatives.
Yet governance remains a challenge – the marker for whether a particular Sacco thrives, said Belinda Atim, spokesperson of the Microfinance Support Centre (MSC), which lends money to savings societies.
Atim said before releasing money to a group, MSC insists a Sacco must have a board and clear structures of accountability. From Kabarole to Kisoro to Jinja, cases of fraud have been reported.
Last year, residents in Sembabule and Rakai accused local leaders of stealing their Sacco money. In December, the Micro-Finance Regulatory Authority was inaugurated by minister of Finance Matia Kasaija to oversee micro-finance institutions, Saccos and moneylenders to stem fraud.
At KYAPS, transparency is one of their strengths, said Sharon Nahabwe, the general manager. It has a seven-member board led by respected religious leader Rev Fr Gervase Nsekanimanya.
When The Observer asked to look at their numbers, they were open to share, clear testament to their transparency. Nahabwe says their Sacco lends individual members between Shs 50,000 and Shs 50 million. Institutional members, like schools or a church, can borrow up to Shs 100 million.
Interest fees range between two per cent and 2.5 per month. A loan runs for 24 months. By the end of October, 4,000 men and 1,000 women had borrowed.
At KYAPS, one’s previous payment behaviour determines future credit-worthiness. There are times when borrowers fail to pay back. But also, a defaulter can be charged a seven per cent penalty.
Credit officer Bahame said the law is unclear on how Saccos can recover money from defaulters.
“You take them to police, after some time, they release them,” he said.
Would they consider transiting from a Sacco to a micro-finance institution or bank?
“No, at least for now,” said Nahabwe with a smile. “Because we may lose some of our clients. When you become an MDI (micro-deposit-taking institution) or a commercial bank, the regulations for lending are tighter. If someone is borrowing above Shs 10 million in an MDI or a bank, they need a registered security, but here we accept land agreements.”
“In Kenya, there are Saccos that are the size of commercial banks. Some of those that changed their status are finding it hard to cope.” he added.