Savings and Credit Cooperative Societies (Saccos) are becoming a strong pillar of financial inclusion in Uganda.
Today, there are thousands of registered Saccos and village saving groups across the country.
The youth and women, among others, constitute the biggest number of Sacco members.
Like any other micro-finance institution, the major goal of Saccos, is to promote access to finance, especially among the active poor. It should be noted that some people are poor, but are not actively engaged in any economic activity to help them overcome poverty.
Where there are cases of absolute poverty, people in this category are not able to save given that their daily income is below $1.99 a day.
Even what they earn is not enough to enable them afford two or three meals a day.
Those who can save also have the capacity to borrow from their Saccos to invest in small and medium size enterprises (SMEs) such as operating in market stalls, retail shops, restaurants, food stalls, brick-laying, etc, which enables them to improve their lives.
Although borrowing does not guarantee life improvement, or business success, research shows that many borrowers are able to improve their lives, especially where the finances are used for the intended purposes.
There are many Ugandans with testimonies about benefits from Saccos. If you do not belong to a Sacco in Uganda today, you are either less informed, very rich, very poor or just selfish.
It is from these Saccos that people are able to raise finances to fulfil their dreams. The benefits of Saccos to members are unlimited. However, the emergency of Covid-19, which caught the world unawares, didn’t spare Saccos either.
By the end of March, many borrowers had already started giving excuses of failure to pay back their loans because they had registered losses due to Covid-19.
Since then, Saccos have not been able to register new members hence a sharp reduction in share capital growth, deposits, borrowing and related activities.
Those who applied for a loan during the lockdown were unattended to because Saccos were not sure of their customers’ capacity to repay the loans. Many businesses were operating below their optimal capacity.
Now that many Sacco members have been left with virtually no money, many members will withdraw their savings. Saccos will be left with little money to lend to clients.
Many new and old members will ask for loans between Shs1m and Shs20m to cater for their domestic needs as well to rejuvenate their businesses. Others will start small businesses using the borrowed funds.
What should government do to help Saccos? It should extend soft loans to Saccos with interest of as low as 1 per cent.
Private sector agencies such as Private Sector Foundation Uganda, should provide quick and unconditional small grants to especially strategic businesses. Government can also offer grants to Saccos .
It can also undertake to provide financial literacy to Sacco members so as to promote management of funds..
There is need to provide farm inputs to Sacco members who are engaged in farming to enable them increase their production capacity. You will notice government is putting a lot of emphasis on commercial banks although these tend to be mostly benefiicial to mainly corporates.
Mr Kiberu is the director at Gateway Research Centre Uganda.