Kampala, July 19 (The New Vision) — The Uganda Co-operative Alliance has warned microfinance institutions against investing much in constructing multi-million houses, saying this was not part of their duty.
The alliance coordinator in charge of microfinance, Patrick Muwumba, said microfinance institutions were meant to lend money to their members and not construct buildings
"I did not come here only to say what you want to hear but also to advise you on what you ought to do," he said.
Addressing members of the Kakuuto Microfinance Savings and Credit Society at Kakuuto county headquarters at their general annual meeting, he explained that investing in capital development would be wastage of funds.
Muwumba explained that it would be absurd for a member to go to the institution to withdraw or borrow money only to be told there is no money because it was used to put up a building.
Muwumba was reacting to claims that the institutions had invested about sh120m to build a house at Kakuuto yet they did not even have a land title or consult the landlord.
"If banking institutions were meant to invest in such buildings, the big banks like Centenary, dfcu and others would be boasting of owning the tallest buildings in Kampala, but even Stanbic sold off the UCB building," Muwumba explained.
He advised members to delay the construction of their building and lend the money to the members.
Kakuuto MP Mathias Kasamba said the Kabaka of Buganda supported development on his land and had to be consulted before construction could begin.
The LC5 chairperson Vincent Semakula, expressed concern over the absence of Bonna Bagaggawale funds in the microfinance, which he said was the most organised among all microfinance institutions in the district.
Army MP Maj. Gen. Julius Oketa, who represented the chief of defence forces, Gen. Aronda Nyakairima, handed over a donation of sh2m to Kakuuto Microfinance.
Water and environment minister Maria Mutagamba, Rakai district chairman Vincent Semakula, Mathias Kasamba (Kakuuto MP) and Gordon Wavamunno of WBS, are some of the members of Kakuuto Microfinance Savings and Credit Society.
By Brad Stave, VisionFund International, Manager of Marketing and Communications
Today, over 23,000 children are impacted each year through micro lending at the VisionFund and World affiliated Ugandan microfinance institution (MFI), MED-NET. Through small loans, borrowers are able to send their children to school, provide access to healthcare, and ensure they are supported and cared for. Additionally, MED-NET provided nearly 14,000 loans totalling roughly $3,500,000 in 2009, and is currently experiencing over 26 per cent growth in portfolio.
These recent social impact and financial successes at MED-NET come in response to a time when the MFI nearly collapsed and faced possible closure, just years prior.
In 2006, an extensive audit of MED-NET found significant inconsistencies in reporting, delinquency levels, and liquidity. The audit discovered discrepancies between the actual and reported financial position of the MFI, showing unaccounted for losses and a lower overall financial portfolio.
The faltering state of the MFI was attributed to a few key reasons. These included a combination of poor overall management and financial management, a lack of an effective management information system, a poor strategy of borrowing to pay for losses, poor delinquency management, and a lack of transparency and proper reporting at the management level of the MFI.
VisionFund and World Vision leadership were faced with the decision to either close, sell, or rebuild the MFI. After careful consideration, and a thorough review of the current state of the MFI in relation to the mission of World Vision Uganda, the leadership decided to respond by addressing the faltering MFI and make an active effort to turn it around.
Repairing and rebuilding an MFI from a fractured state is not a simple task. In fact, many leaders were involved in the process to identify key changes that needed to be made.
Some change initiatives included replacing MFI leadership with professional and experienced staff, updating and communicating new policy, developing clear and consistent reporting mechanisms, instituting new key functions, providing a proper loan tracking system and finance solution, and addressing service concerns from micro borrowers while providing a better end-to-end experience.
Reviewing and responding to key failings at MED-NET with best in class leadership and services is something that the current MED-NET CEO, Harriet Mulyanti, is proud of. Mrs. Mulyanti stated, “The need for microfinance services in a country like Uganda is great. For many borrowers, a MED-NET micro loan is their only chance to develop or expand their business. I’m very pleased and thankful that VisionFund and World Vision decided to rebuild MED-NET from the ground up. It is now a financial institution that is known throughout Uganda as one that provides excellent microfinance services with integrity.”
VisionFund’s President and CEO, Scott Brown, shared, “Everyone throughout the World Vision and VisionFund partnership is thrilled that MED-NET has become an increasingly successful and valuable member of the microfinance network. Recently MED-NET was awarded substantial donor funding, I believe this stands in testament to the MFI’s accomplished turn around and our future expectations of success.”
Kamuli — Government is in advanced stages of establishing a law that will pave way for the formation of an autonomous institution that will license, regulate and supervise non-Microfinance Deposit Taking Institutions (MDIs), an official has disclosed.
State minister for Micro-Finance Caroline Okao said when passed, the Tier 4 Microfinance Institutions Act, will supervise microfinance institutions that are in the category of Tier 4 of which Saccos and Microfinance institutions MFIs are part.
MFIs that are not MDIs are registered as companies and hold money-lending licences.
The minister was speaking af a function where the Microfinance Support Centre Ltd (MSC) handed over cheques worth Shs120m to village savings and loan associations in Kamuli District last week.
During the function, Ms Okao said the law will promote social and economic development; ensure legitimacy and confidence building of members, customers and investors in the microfinance industry.
"The law will enable the application of prudential standards to microfinance institutions in order to safeguard the depositors' funds," she said. During the same function, the minister also launched the new government strategy of Group Lending Programme for Community savings and credit groups where the MSC will directly provide financial services to community saving groups such as village savings and loan associations and nigiina groups.
The minister said under the programme, government will conduct capacity assessment of the existing groups in Busoga sub-region, starting with Kamuli. She explained that the groups will be categorised according to their strengths so that strong ones get financial linkage while weak ones get additional financial training.
"I would like to inform you that government has designed programmes that go beyond the SACCO methodology to support the self-help groups methodology among the communities," she added.
MSC board chairperson Justine Bagyenda said they had developed a rural development strategy to enhance the deepening of microfinance with focus on access to wholesale funds, production and productivity, value addition and marketing, community information systems and rural finances.
"Microfinance Support Centre is mandated to provide wholesale credit and strengthening management capacities of groups through provision of business development services and the law will help secure it," Ms Bagyenda said.
She said the MSC group programme would make it easy for people at the grassroots that don't have collateral to access loans because members would act as security for each other.
The saving culture
The Speaker of Parliament, who also the Kamuli Woman MP, Ms Rebecca Kadaga, challenged local leaders and community development officers to promote the saving culture among the populace and ensure it takes root for development. She also called for the revival of cooperative societies in Busoga which she said had led to the development of the region in 1980s.