Sabiiti Herbert
I wrote & shared an article in the recent past whose content revolved around investment clubs,Read More a field that a colleague and business associate of mine later expounded more in his article titled Investment Clubs and SACCOs hold secret to empowering Ugandan Youth Entrepreneurs.
In the article, he advise(s)d the youth to look to investment clubs and saccos for their funding needs. The mind behind this being that many promising young entrepreneurs are just unattractive for commercial banks and consequently are unable to obtain credit to finance their ventures, from inadequate collateral to the un ending list of bank requirements for one to access credit facilities.
In his article’s closure, he encourages all stake holders concerned to promote and encourage formation of investment clubs and SACCOS. Yet Lo and behold, there’s word about a document still under draft that seeks to regulate Tier IV (4) Micro Financial Institutions. When dawn breaks and this regulation is passed, we shall see Bank of Uganda taking over micro-finance institutions that have total capital share of above UGX 500M and Savings of above UGX 1.5B and sure enough, this take over will come with adverse business implications viz;
1. Control: The members might loose control because all the decisions of the SACCOS shall first be approved by Bank of Uganda.
2. The Bank of Uganda might impose obligations like stabilizing fund or meeting the minimum requirement ratio of liquid assets to total savings. Members’ savings or share capital might be held idle by bank of Uganda in gist of meeting the liquidity ratio.
3. Might limit or remove incentives for members to cooperate among co-operators in the SACCO movement
4. As you may know by now, Bank of Uganda will definitely limit the level of investments. SACCOS have been benefiting through investing in other ventures like schools, real estate, transport, etc. But who knows, the Bank of Uganda might restrict the scope of investment to only saving and lending.
5. Unnecessary costs like restricting the premises or requiring number of staff to operate the SACCO.
Oh, did I also mention that the regulations suggest that members can not use their share capital as security for borrowing, you have to use savings. And to crown this up, SACCO members will not be allowed to borrow money in excess of UGX 100m. This kind of restriction is uncalled for or there is more than just meets the eye! One would keep wondering why policy makers could sit and draft such an unfair regulation. Could it be that policy makers did consultations and bench marking in other countries or do we have a fruit of the “just for just” attitude on our hands?
The SACCOS I subscribe to have been giving us dividends of not less than 18% of the share capital, this regulation restricts dividends to maximum of 10%. This makes SACCOS unattractive investment option. Sacco members may opt to sale off their shares
Concerned stake holders have a call to make here, put together their voices against this in offing regulation that will cripple the power of attraction that SACCOs have today towards organized groups and investments.
We may NOT afford sitting and watching while SACCOS take a slow fade just like cooperatives.
Sabiiti10@gmail.com