Eight years later, farmers still waiting for revival of Cooperative Bank

A farmer walks through his garden at Buginyanya Zonal Agricultural Research and Development Institute. Farmers used to be facilitated through loans acquired through Cooperative bank. Photo by David Mafabi .

What you need to know:

  • The Minister says while there is no cap on the interest that banks charge on their loans, the entry of a bank that gives low interest loans, especially to farmers, will be a game-changer.
  • In the same breath, some unscrupulous managers of some of the unions connived with some officials in the Ministry of Cooperatives and Marketing to sell off Union properties.

The Promise
In October 2009, the then Minister of State for Trade, Mr Nelson Gagawala Wambuzi, announced that government had set into motion plans to revive the defunct Cooperative Bank.
“The Government is going to re-finance the Cooperative Bank and intends to purchase tractors and lorries for Cooperative Union members as loans. These loans will not be paid to the Government, but to the bank,” Mr Gagawala Wambuzi said.
The minister, who was speaking at Hotel Triangle in Kampala during the annual general meeting of the Uganda Cooperative Alliance (UCA), an umbrella organization that brings together all the country’s cooperative unions.
UCA had been the biggest shareholder in the Bank which had been formed in the 1960s, but was wound up in 1998 amid a host of problems, including mismanagement, fraud, poor credit policies. and practices and appointment of incompetent people into senior management positions.
Other problems that plagued the bank in the run up to its closure included government interference, insider lending and failure by the Bank of Uganda in its supervisory functions over the bank.
Minister Gagawala Wambuzi’s announcement was in response to demands by UCA members for a government statement on the fate of their institution.

Mr Gagawala Wambuzi then told the co-operators to prepare for the return of the bank and asked them to go one further and mobilize women and youths, who constitute the largest percentage of Uganda’s population, to join the cooperatives if they were to reap big from what was on offer from the government.
Cooperatives, the minister said, were the only way in which poverty could be fought, adding that since government was keen on using cooperatives as vehicles through which to channel loans to the populace, it was only logical that the populace was mobilised to embrace.
Expectations that the bank was to be revived had been first raised during the December 2008 launch of the Uganda Central Cooperative Financial Services (UCCFS) by 51 primary Savings and Credit Cooperative Societies (SACCOs) across the country.
One of the objectives of the financial institution which was registered on July 28 2008 by the Registrar of Cooperatives as a Cooperative Society limited by shares and whose intended role was to provide funding to all sorts of Cooperatives was to mobilize funding for the bank’s revival. That was not achieved.
About two years later, Mr Gagawala Wambuzi, lost his Bulamogi County parliamentary seat and his Cabinet portfolio, but by then nothing had been done to realize the promise. But the hopes of the UCA members were kept alive when Ms Amelia Kyambadde, who took charge of the Trade and Industry docket during the 2011 elections reaffirmed government’s commitment to revive the bank.
On May 13, 2016, while speaking in Lusooozi Trading Center in Kyankwanzi Sub-county during the commissioning of a Shs80 million office block for Kyankwanzi Savings and Credit Cooperative Society (SACCO), Ms Kyambadde said the government was in the process of reviving the Bank as a way of breathing life into the Cooperative Movement in Uganda by availing co-operators with low interest credit facilities.
“The revival of Cooperative Bank will address the issues of the farmers and the traders like affordable low interest loans,“ she said.

This, Ms Kyambadde said, had been precipitated by the realization that traders and farmers find a torrid time accessing credit from commercial banks, which besides demanding high interest rates also set repayment conditions that most of the would-be borrowers find it hard to meet.
The Minister said that the Cabinet had already endorsed the revival of the bank and has since charged her ministry with the task of working out the modalities and ensuring that cooperative movements across the country have linkages into the bank.
She said the beginning point would be for government to pay off debts of nearly Shs13billion which the State owes about 10 cooperative societies.
Mr Jackson Abitekaniza, the Principle Cooperative Officer in the Ministry of Trade, Industry and Cooperatives, named some of the Cooperatives that had been lined up for payment as East Mengo Cooperative Union, West Mengo, Bunyoro Growers Cooperative Union, Masaka Cooperative Union Ltd and Acholi Cooperative Union Ltd.

However, more than seven years since the promise to revive the bank was first made, it remains a pipe dream among members of the cooperative movement.
The Shs13 billion pay off that government had promised to clear what it owes the 10 Cooperative Societies across the country has also not materialized.

Official Position
The State Minister for Cooperatives, Mr Fredrick Ngobi Gume, says that plans to revive the bank are still on the cards.
“We engaged President Museveni and he gave his approval. We are now working with the National Planning Authority (NPA) to carry out some research on how best this bank can be revived,” he said.
The Minister says while there is no cap on the interest that banks charge on their loans, the entry of a bank that gives low interest loans, especially to farmers, will be a game-changer. It, he says, will force commercial banks to lower interest rates and also fund non-traditional sectors like agriculture.
Mr Gume says the Ministry of Trade and Industry is also keen on establishing the conditions under which the bank was liquidated as this will provide it with an insight into how best to avoid some of the pitfalls the bank had suffered.
“We need to look at the liquidation report from the Bank of Uganda, but we are yet to receive any feedback. I hope that it comes soon enough,” Mr Gume says.

The collapse of the Cooperative Bank meant that most of the country’s co-operative societies could no longer access low interest loans in the form of Crop Finance to continue purchasing commodities like coffee, cotton, maize and others from the farmers.
In other cases, some of the cooperatives, including Masaka Growers Union, which had installed a plant to process juice from the pineapples that had been in abundance in the Masaka area were forced to close operations. The plant ceased production in 1989.
The collapse of the cooperatives also meant that those who had been engaged in direct and indirect employment no longer had jobs to hold onto.
In the same breath, some unscrupulous managers of some of the unions connived with some officials in the Ministry of Cooperatives and Marketing to sell off Union properties. A case in point is the Busoga Growers Cooperative Union, which owned a number of commercial and residential houses in Jinja, a coffee processing plant in Namulesa on the outskirts of Jinja and a cotton ginnery in Bulumba in Kaliro District.
The commercial and residential houses were sold off to private individuals while the ginnery and coffee processing plant were sold off to “investors”. Some of the only visible assets that has remained seems to be a couple of stores in Masese in the industrial area of Jinja.
The collapse also meant that farmers were now bereft of a platform on which they could bargain good prices for their produce.

They were now left at the mercy of unscrupulous produce buyers who were taking their produce for a song.
That inevitably led to a collapse of the rural economies and an increase in the levels of poverty in the countryside.
That resultant poverty and income inequality forced more rural-urban migration as people left the villages to flock the towns in search of jobs or anything that could put food on their tables.

The result has been a sharp rise in the number of slums and the advent the street children phenomenon.

Daily Monitor position
The planned revival of the Cooperative Bank is certainly very sweet music to the ears as it might in the long run help farmers access the much needed funding to boost production. It is, however, important that policy in other linked sectors as agriculture be reviewed early enough before the bank re-opens.
One of the biggest challenges that the agriculture sector has been facing is failure to convince commercial banks to provide them with financing. Most banks have been finding it difficult to fund enterprises which operate at subsistence level and using rudimentary methods.
The government should therefore be working towards a departure from the hand hoe as the main farming tool and the dependence on rain as the only source of water for farming. The country’s farmers should be thinking of mechanization, irrigation and making pesticides, herbicides and fertilizers accessible to all. Only then will low interest loans be meaningful to the agriculture sector.