Care International vs the Ugandan government in microcredit services

The government of Uganda operates a microcredit program called the Savings and Credit Cooperative Organisations or SCCO's. The government lends money to each local SCCO at 9%, while the local lends out money to the people of Uganda at either 9 or 13 percent interest.

However, another service is operated by Care International which uses a savings and loan style to serve Ugandans. The service from Care has become more popular in some villages do to charges of corruption within the SCCO's. Also, some politicians are using the program as a political tool.

In the latest entry from The Guardian's Katine project, Joseph Malinga tells us about the problem with the SCCO's and why people are using Care International's service instead.

In Uganda, the success of the SACCO programme has been mixed. While the scheme appears to have been successful in western and central Uganda, it has faired less well in the east and north. And the programme has been tainted by corruption, with people's savings being embezzled with impunity.

Each sub-county is expected to have at least one SACCO that would be supported by government through the Uganda Cooperatives Savings and Credit Cooperative Union (UCSUC), the body mandated to oversee the success of the programme.

There is a SACCO in Katine, with a membership of 336, but any benefit of the programme, introduced two years ago, has yet to be fully realised in the sub-county.

It has been claimed that sub-county officials have failed to mobilise residents to benefit from the programme.

The chairman of Katine's SACCO, Sam Emolu, says: "We have a membership fee of Shs 2m, but without savings or anyone coming to borrow, our money is just redundant in the bank."
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But Katine residents have embraced the village savings and loans associations (VSLAs) that have been introduced in sub-county as part of the Katine project, supervised by the NGO Care International.

The VSLAs are more affordable and residents have more control over their contributions. While SACCOs charge a registration fee of Shs 2,000 ($0.90) and Shs 5,000 for membership, VSLAs charge Shs 200 as a "disaster fee" (the money goes into a fund that can be accessed for emergencies) and Shs 500 for shares. A resident can buy as many shares as they want. Interest rates are high, at 10%.

Cornelius Onaba, the chairman of Emorikikons VSLA, in Olochoi village in Katine parish, says SACCOs are not suitable for the poor.

He says SACCOs exclude of the very needy who cannot afford to pay the fees. He said his VSLA group of 30 members has so far collected Shs 1.2m and all members are responsible for the security of their money.

"The keys to our safe [where money is kept] are with three people, while the box itself is with another person - so by the time you think of stealing, you really need to convince many people. Even then, we do not encourage money to be redundant. We try as much as possible to see that members borrow money and use it for development," he said.