Why a govt primary school can’t get a loan from a commercial bank

The recent revelation surrounding the plight of the government primary school (Wobulenzi Public Primary School in Luweero District, ) and its entanglement in a loan predicament is not merely a sensational headline; it’s a sobering truth!

The dismay over this situation stems from fundamental legal limitations that prevent a public institution from procuring loans without due authorization processes.

The procurement of a loan by a public entity necessitates a scrupulous series of governmental authorizations. This unfortunate incident starkly highlights how a governing body, in this case, the School Management Committee (SMC), seemingly assumed ownership of the school and its land, executing an agreement without proper mandate.

Secondly, the legal ownership of public land, irrespective of its tenure system, is exclusively vested in the Uganda Land Commission by law. Therefore, the perplexing question arises: How did the bank accept a title as collateral, which did not rightfully belong to the school in the first place?

Thirdly, the acquisition or leasing of land by public, religious, or community schools mandates explicit authority documented and minuted by the trustees. For instance, in the case of the Anglican Church, this authorization typically involves three Bishops (Trustees) and the seal of the Registered Trustees of the Church of Uganda to validate the transaction. Was such a meticulous process adhered to in this particular school’s case?

Moreover, any land held in trust cannot be sold but can only be rented or leased, following a stringent procedure. Selling such lands presents substantial challenges for both the buyer and the subsequent administration of access, use, and control, often inciting public hostility. This is also happening for land help by Trustees of Scouts!

Additionally, valuation and assessment reports are indispensable for public entities seeking loans or land acquisition. In the instance cited, Shs100 million was involved. However, the legitimacy and accuracy of such figures cast doubt, pointing fingers at a possibly fraudulent SMC. Are we not vigilant enough to discern these anomalies?

Lastly, there’s a prevailing misconception among many individuals and banks in Uganda that fraudulent transactions, particularly regarding fixed assets like land, can endure comfortably. My earnest advice is clear: ‘Kibanja holders’ should secure a Legal Certificate of Occupancy; Lessees must obtain proper consents, and purchasers should validate the legitimacy of the selling entity. Ignoring these foundational legalities might blur lines but won’t alter realities. For banks, due diligence in verifying title genuineness is imperative to avert losses.

The gravity of this situation compels us to advocate for more stringent adherence to legal protocols, especially concerning public assets, to safeguard against such distressing incidents in the future.

When we consider the implications of the above illegal scenario, first we need to understand that the foremost implication lies in the breach of legal and governance protocols. The scenario exposes a failure in the due process required for public entities to engage in financial transactions, particularly in securing loans. This could lead to potential legal actions against the involved parties, including the school management committee and potentially the lending institution for not following proper verification procedures.

Secondly, such incidents can have an immediate consequence of eroding public trust in governmental institutions. The revelation that a government primary school could become entangled in a loan situation due to procedural oversights or possible fraud undermines public confidence.

The gravity of this situation compels us to fervently advocate for stringent adherence to legal protocols, especially concerning public assets. Such adherence would safeguard against distressing incidents in the future which are apparently increasing.

Mr Jasper Tumuhimbise is a Clergy and Group CEO, Church Commissioners Holding Company Limited and Managing Partner of  N.I.C.E.