Access to Rural Non-Farm Livelihoods - Natural Resources Institute

een any negative effects 43 . However, the evaluation of the RDDP found that clients
perceived their businesses to have increased turnover and profits, which led to improved
household wellbeing and further diversification. Wellbeing included higher levels of
consumption and, of particular importance to women, the ability to pay school fees, as well
as a feelings of increased independence and autonomy, pride in being part of the wider cash
economy, and general empowerment and emancipation – most clients were very positive
about the DWCS and the VBS overall.
The evaluation of the RDDP concluded that the scheme is targeting the group it was
established to serve, and that outreach has been impressive, particularly considering the
complete lack of institutional support. However, although it is difficult to determine from the
existing flawed accounts, it is likely that the VBS is technically insolvent, and operating at a
loss, charging interest well below the real cost of lending, and eroding the capital fund.
Nonetheless, the portfolio is well managed, despite a lack of reporting, and the DWCS is one
of the few RDDP interventions which specifically targets the poor. Thus the evaluation
recommends that Danida continue with it and even expand it, either by investing heavily in
the VBS, or by identifying another MFI to take over its implementation.
Despite the successes of the RRCS and the DWCS there is still a huge unmet demand for
credit, with only a fraction of a percent of the district’s adult population able to access these
funds in a year. Lack of rural banking facilities remain a problem for both would-be and
actual borrowers and savers, as does the lack of grace periods, and the lack of long term
credit. Bird et al. (2000) also suggest that Danida and the RDDP consider introducing a third
“rung” to the credit ladder to bridge the gap between the DWCS and its group lending
methodologies targeted at the poorest and the RRCS/CERUDEB with its strict collateral
requirements – this would serve the “middle poor” and allow them to build up the assets
necessary to eventually access CERUDEB loans 44 .
Bird et al. (2000) cite MFPED figures that show that Uganda has one of the lowest domestic
savings ratios in Africa. This lack of a culture of saving in banks is no doubt related to the
very low rates of interest paid on deposits, which are typically less than the rate of inflation,
and much less than the rate of increase in value of well managed livestock, most rural
people’s preferred investment option, while the costs, inconveniences, and risks associated
with travelling to urban centres to make deposits and withdrawals are a further deterrent.
CERUDEB does not promote saving and pays interest on deposits at rates similar to other
financial institutions, i.e., below the rate of inflation. Although supposedly a core part of the
DWCS methodology, the VBS also does not promote saving, and most of its clients do not
save voluntarily beyond the requirement to have savings on deposit in order to access credit.
The evaluation of the RDDP was critical of Danida in not encouraging CERUDEB, the VBS,
and other institutions to promote and facilitate saving in rural areas, e.g., through mobile
banking, or existing rural Post Offices. Bird et al. (2000) suggest that existing Rotational
Savings and Credit Associations (ROSCAs, or cash-round clubs), which are currently
43 Negative effects of credit could include business failures due to constraints other than lack of capital or credit
which leave a woman worse off, as she still has to repay the loan, loan capture and subsequent misuse by other
household members, such as the husband, and diversion of funds to consumptive expenses in the event of
unforeseen shocks, leading to difficulties in repayment and subsequent penalties, etc.
44 This would also require expansion of the bottom “rung” of the ladder, the DWCS, and possibly a parallel
scheme for men, so that it would be able to “graduate” sufficient numbers of clients to higher “rungs”.
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