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

committees now successfully coordinating assistance in transformation, rating, VSLAs,
and consumer education. However, in all these cases, volunteer labour of member
organizations is insufficient to bring about effective coordination; full time professional
staff reporting to the steering committees are necessary.
6) Wholesale lenders should require regular performance monitoring and industry
accepted reporting practices. Wholesale lenders, in collaboration with apex
institutions and donor agencies, should educate SACCOs that monitoring and reporting
are more than just requirements for the wholesale lender; they can be beneficial tools for
management. Wholesale lenders, apex institutions and donor agencies should also
continue to coordinate to share and standardize the reports required of the SACCOs
they lend to, in order to reduce SACCO administrative costs.
7) Prior to accepting a wholesale loan, the SACCO should undertake a wide
member sensitization programme about the source and implications of the
funding. SACCOs should clearly explain the origin and purpose of the wholesale loan
so members understand the objectives and expectations. This also should be coordinated
with various consumer education efforts already in place.
GUIDELINES FOR LENDING TO SACCOS
Wholesale lenders should not lend external funds to SACCOs with weak management
capacity, ineffective governance structures and poorly performing portfolios. Strong
SACCOs are identified by a number of characteristics. The research team has attempted to
delineate these features in a short list. The seven items in this list should be seen as the links
of a chain, in that weaknesses in any one of them can lead to SACCO failure. Lenders, in
their rush to move money to SACCOs, should not be satisfied with positive indicators in
some but not all of these areas.
1) Strong Leadership. It is no secret that a successful SACCO depends, to a large extent,
on strong and dedicated leadership. Leadership refers to both the management team
(manager, loans officers, cashiers, and accountants) and the BOD. The BOD is elected
by the general assembly to represent the members and guide them to sound policy
decisions. The management team implements policy decisions and monitors the
performance of the institution. For these reasons, the members of the BOD and
management team must possess a the following qualities:
a. trustworthiness
b. motivation
c. accessibility
d. technical capacity
e. respect from the community
2) Member education. Members should be continuously educated about their rights and
duties as SACCO members and informed of the performance of the institution in terms
they can understand. Knowledgeable and involved members insure good governance,
and only they can replace a poorly performing BOD.
3) Consistent Performance Monitoring. Strong SACCOs consistently perform
institutional performance monitoring. International microfinance agencies and
organizations have collaborated to develop several sets of microfinance performance
The Effects of Wholesale Lending to SACCOs in Uganda
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