Tuesday February 25 2014

Earning from a savings group


By Jonathan Adengo

When five young men set out to start a savings group four years ago, few of them knew that the group would grow up to the 35 members they have today.

They started their group way back in March 2010 and they called it ‘Ruhinda Youth Savings Association Ltd.’

“The association is basically for the youth who come from Ruhinda,” says Vanansio Natuhwera Bagateireyo, the chairperson of the association.

They started the group as five young men on the foundation of the church, as youth from Ruwoya Catholic Church.

Natuhwera says they thought they would only admit members from Ruwoya church. But as they continued to grow, they decided to open it up for the youth from Ruhinda sub-County in Rujumbura county, Rukungiri District so as to benefit the whole community.

As University institutions continue churning out youth into the jobless world, few especially those who get employment, cannot easily borrow startup capital from banking institutions.
The bank requirements do not favour them given that they don’t have enough security. Natuhwera and his friends faced a challenge when they were just fresh out of school and tried to borrow money from banks to better themselves because they did not have enough security to guarantee the loans which they wanted.

“We decided to start up an association to not only allow us to save but also borrow at a manageable borrowing rate and security demands,” he says. When the five members started collecting Shs20,000 per person every month, the members surprisingly started applying for loans immediately.

The money at that time was not enough to be issued out as yet. This prompted the group to come up with a Constitution and also other terms of borrowing.

First, in order to borrow from them, one had to be a member of the association. They also decided that one cannot borrow more than three times his savings which allowed them to contain the growing number of youths.

One also required having two guarantors from the group so as to easily recover the money in case one defaulted.

Natuhwera explains that they went ahead and registered the group with the registrar of companies and also got the necessary paperwork done to allow them to open an account to deposit the savings.

Natuhwera, himself a marketer, speaks passionately about their savings initiative. According to him, “Development is movement from the current and undesirable situation to a future desirable situation.”

“We didn’t stop at just registering and saving, we invited other people to join the group,” he says.

By the end of 2010, the group had grown to 15 members. And by the end of 2012, they had increased to 22 members and in 2013; they were 35 members in total.
Even their monthly savings grew over the years.

“The association increased the monthly savings gradually from Shs20,000 when we started, to Shs30,000 and now we contribute Shs40,000 each,” explains Natuhwera, the chairperson. He also adds that their borrowing rates have also been able to decrease with time to allow their members get soft loans.

“From the 15 per cent when we had just started to borrow, the rates kept on reducing to 8 per cent, then 5 per cent and now 2 per cent. Even the amount of money borrowed has been multiplied by four times the amount one has saved,” he explains.

Qualifications to join savings association

To join their association, the chairperson explains that one has to be hailing from the same sub-county of Ruhinda which sort of cuts out other people who would like to show interest. This rather harsh qualification, he explains, helps them to easily manage themselves.

Also, one must be well-known to the other members of the group. Natuhwera adds that one’s integrity must not be questionable.

“You should be in position to save at least Shs40,000 in a month which is the required savings figure.”

Their journey
“It’s been a rough journey since we started out. We used to hold meeting at one of the members’ home and even kept out money there which was very risky. We used to be at the mercy of the treasurer but we now have an account where we bank the money. We did not have offices but as time went on, we managed to get a home in Nakawa where we hold our monthly meetings and also act as our headquarters.”

Natuhwera’s future prospects

Apart from real estate, the group wants to start a micro-finance so as to lend money to other members of the public. He explains that they decided to save enough money that they want to convert into shares before they open in up for other people to come in.
The group has members who have borrowed money to finance their education. This is a big boost to the group that hopes to create jobs for themselves as they keep on growing.
In five years to come, they all want to own businesses under a carefully calculated plan that will benefit all the members.

How the Sacco funds are managed

This money, he explains, is for the members and they lend it to the members to startup businesses for themselves. Many of their members have been able to buy land, start building houses which is a big step towards self-development that they were looking out for.

Natuhwera says they are also venturing into real estate as a group and all the assets they accumulate would be shared equally amongst all the members in the group.

Managing the funds
The association has an organised committee that oversees the day to day management of the funds. The group boasts of different members from different professions whom they have been able to utilise and assign the necessary group tasks depending on their qualifications.

The executive committee consists of the chairman and deputy, treasurer, chief whip, legal advisor who is a lawyer. They also have trained auditors. All these people serve a term of one year after which other members are voted in during their Annual General Meeting.

Aside from the mainstream management, the association also has sub-committees who are charged with different responsibilities, they have the investment committee, Auditors, and they have legal advisors, accountants.

“We have reached where we were because of reliable, dependable members due to the high scrutiny we use in admitting members into the group,” he explains. He also adds that they have denied people admittance into the group due to questionable integrity.

The association discourages holding money individually and every member is supposed to pay money to Centenary Bank where they have a joint account. These individuals then present receipts to the Treasurer as evidence of payment.

They also have fines amongst themselves which are charged on absentee members and defaulters and this money is used in the running of the association.

Before one borrows money, he is subjected to scrutiny by the treasurer who checks to make sure that they have not defaulted before and also they are not demanding them any money.

After his approval, the chairman under the guidance of the legal committee then awards the loan to the person borrowing. The group has an account which has three signatories of the chairman, treasurer and secretary who all sign a cheque that is presented to the bank.

Interest on the borrowed money is paid monthly and fines are charged on delay of payment.