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

some members improved their repayment rates in order to help the SACCO avoid problems
with the wholesale lender.
Kijura SACCO did not inform members whether their loans were disbursed from the
institution’s capital base or the external loan. This ambiguity motivated some members to
repay the loans well or better than in the past because they were uncertain whether the loan
came from their personal savings or the external funds. Members wanting to maintain the
strength of the institution by preserving the voluntary savings repaid loans thoroughly.
Bunyaruguru SACCO informs its members of the source of the loans disbursed. According
to the members, the result is that they repay better than previously. Those members that
accessed loans from the external credit source maintained superior loan repayment because
they believed good repayment of loans from the wholesale loan would lead to future funding
for the SACCO. At the same time, the members accessing loans from the share capital and
savings funds improved their repayment rates because they also believed this would help the
SACCO access additional funds in the future.
FINANCIAL PERFORMANCE
The effect of wholesale lending on the financial performance of the institution is important
to note but difficult to determine. Many of the SACCOs we visited keep inconsistent
financial and portfolio records that vary in quality from year to year. In addition, many of the
SACCOs we visited did not keep reliable statements prior to accessing wholesale loans, and
ascertaining the effects of the wholesale loan on the SACCO is difficult in the absence of
baseline information. To the best of our abilities, we have analyzed the effects of the
wholesale loan on the financial performance of the institution based on a number of
indicators. Where relevant, we compare the changes
in the six SACCOs that have received external credit
and provided financial data to the two control
SACCOs that provided financial statements.
The effects on financial performance relate to the
change over the 12 month period from the last
financial end-of-year before the SACCO accessed its
first wholesale loan to the first financial end-of-year
after the loan was disbursed. Note that SACCOs
received wholesale loans in different years from 2001
to 2005. The changes in financial performance for
the control group of SACCOs relates to the 2002-
2003 financial year. In an attempt to compare like
institutions, the research team decided to use 2002-
2003 data for the control SACCOs. At this time, the
membership sizes of the control SACCOs were
similar to the sizes of the SACCOs that received
external funding.
The Effects of Wholesale Lending to SACCOs in Uganda
Picture 5: Tracking Performance, Bugongi
SACCO
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