One of the greatest challenges in our economy is the strain in accessing credit. It’s a quandary Ugandans generally face irrespective of the traditional gender or net-worth biases.
Many astute businessmen confess of how it’s problematic for them to access credit from the mainstream financial institutions. It gets worse particularly for the rural women.
Some microfinance and banking institutions have done well rolling out various credit facilities for micro, small and medium-sized women entrepreneur groups. But the terms are distressing.
The repayment periods are too short and the interest rates are high. Commencement of repayment is expected within 30 days getting the funds and the loan could have been subjected to deductions.
This triggers panic as clients dash to meet the bank’s terms of repayment. This has kept majority of the women in a cycle of borrowing as much of their profits are recouped back in interest.
So, a woman who first borrowed years back to boost her second-hand clothes business, remains the same since the financial institution has mastered the art of draining her profits.
For the rural women, it’s even worse. Besides the inadequacy of financial institutions in their areas, women do not have the collateral required to access credit. This represents a disjoint in our quest to become a middle income economy by 2020.
Going by statistics, women constitute about 51 per cent of Uganda’s population of 34.9 million (Census, 2014 results). The economically active population is 11.5 million, of which 53 per cent are women. How then is it possible to reach the middle income without the involvement of the larger part of the economic development players?
Less than 12 per cent of economically active women are in paid employment; the remainder are either self-employed or contribute unpaid family labour. Even in paid employment, women are more likely than men to be in poorly paid jobs.
Women are important actors in the small and medium enterprises (SMEs) sub-sector. They own and operate a significant percentage of the SMEs, especially at the informal level.
They are also the majority players in the informal sector - constituting about 86.2 per cent. The women–owned enterprises impact positively on both employment and wealth creation. They promote equitable distribution of income; stimulate local development, culture of entrepreneurship and business–related skills.
Yet women face many challenges in their attempt to grow their enterprises.
They have difficulty in accessing funds due to collateral constraints, they have unequal access to land and property titles through matrimonial and inheritance laws, they are stifled by laws requiring them to have permission from their husbands to borrow money, they are subject to patriarchal controls thus limiting their mobility and economic independence, and they lack information regarding business opportunities, among others. Lack of education limits the scope of women’s enterprise activity and is one of the causes of poverty for Ugandan households.
These are the issues that informed the government’s initiative to start a special credit facility for women. Dubbed the Uganda Women Entrepreneurship Programme (UWEP) or the Women Fund as is referred to, the programme aims at improving access to financial services by women and equipping them with skills for enterprise growth, value addition and marketing of their products.
As a remedy to the short repayment period and high interest in the mainstream financial institutions, UWEP beneficiaries are given a grace period and loan term based on the maturity period of the enterprise (the time at which the enterprise begins generating income).
The maximum loan term is three years (36 months). Groups that repay the revolving fund within the first 12 months of receiving the fund, pay only the principal without interest. Any repayments that go beyond 12 months attract a service fee of 5 per cent per annum to cater for the costs of inflation.