Effects of Wholesale Lending to SACCOs in Uganda - Rural Finance ...

funds, explaining to the governmental officials that the members of the SACCO might
perceive the funds as entandikwa. 4
The management of Buzaaya SACCO did not sensitize members prior to disbursement of
the wholesale loan to its members. The SACCO discovered many of its members considered
the loans to be entandikwa or government handouts and as a result members have generally
not repaid those loans disbursed after the external funds came in. Buzaaya SACCO’s
management has struggled post-disbursement to educate members on the differences
between RMSP and previous government lending schemes and other social programs.
The Chairman of the BOD of Panyimur SACCO voluntarily submitted his business, a hotel
in Nebbi, as collateral for the wholesale loans in the hopes it would demonstrate his
confidence in the SACCO and his commitment to full repayment. He and the BOD
members continually sensitize members about the source of the external credit during
church meetings and local council meetings, at social events, and in the waiting room of the
SACCO.
Box 1: The Experience of a
SACCO that Ceased Using
Wholesale Credit
Shuuku SACCO accessed two
wholesale loans in 2002 from two
different lenders: MSC and the
Stromme Foundation. While the
SACCO did not plan on
administering two external credits at
the same time, it accepted and
managed to repay both without
difficulty. The BOD decided there
was no longer need for additional
loan funds because the SACCO had
mobilised enough savings and share
capital. The SACCO has seen
considerable growth over the past
four years, pays 2% annual interest
on deposits and offers loans at 2.5%
per month declining balance – a
lower interest rate than all the other
SACCOs we visited. Since 2004 the
SACCO has not used external funds
and does not plan on accessing
wholesale credit in the near future.
Future Wholesale Loan Access
The Effects of Wholesale Lending to SACCOs in Uganda
Only one SACCO, of seven, expressed reservations
about accessing future funds from the wholesale lender.
The BOD and management team of Ikongo SACCO
debated whether the SACCO needs access to more
external funding. The manager expects to apply for
additional funding from MSC but members of the
BOD admit they would prefer the SACCO lend
available savings and share capital. To date, Ikongo
SACCO has not applied for an additional wholesale
loan.
The remaining six institutions have completed
applications for future loans or have expressed interest
in accessing loans. ZEU SACCO plans to apply for
additional loans in the future but at the moment, the
SACCO is focusing on recovering bad loans. The
remaining five SACCOs have all completed
applications for subsequent loans.
Bunyaruguru SACCO has received two loans. One loan
was completed in June 2004 and the second loan is
expected to be completed by March 2007. The SACCO’s third loan application was recently
approved by MSC and the SACCO is awaiting disbursement of UGX 30 million. The
manager explained the SACCO’s intention is to be self-reliant and the AGM recently
resolved not to rely solely on external funds. As a result, members are required to purchase
4 Entandikwa means “start up.” The Ministry of Gender, Labour and Social Development (MGLSD) lent UGX
9.92 billion to thousands of poor people with the announced intention of improving their economic status.
However, this lending scheme was marred by corruption and non-repayment of loans.
19