HARNESSING THE POWER OF THE SACCOS

Recently I had the pleasure of attending a training workshop for savings & credit cooperatives conducted by the African Confederation of Co-Operative Savings & Credit Association (ACCOSCA). The training was aimed at renewing our appreciation for the cooperative’s philosophy.

An intense program that saw us seeing double after three days, served among other things, to renew my faith  in the power of collective action.

Among the SACCOS represented were the UPDF's Wazalendo and the police's Exodus SACCOS. Both easily the biggest SACCOS by membership and the former the largest SACCOS by any measure in Uganda and among the top 10 biggest on the continent.

Wazelendos cooperatives CEO, the unassuming Colonel Joseph Onata had my jaw on the floor when he casually mentioned they made a surplus of sh71b last year with assets approaching trillion shillings.

The numbers are impressive enough but for me the wonder is that this has been accumulated by among the least paid workers in Uganda. It is testament to the wisdom of starting where you are and the power of consistent action over time.

Beyond the numbers the SACCOS is serving as vehicle for improving member welfare through supporting individual development and eventually ensure members have something to start with when they leave the forces.

I never tire of saying that the reason why our continent is poor is our inability to aggregate our resources, be it land, capital or human resource. Needless to say it starts with the fragmentation of the continent into 50+ countries.

The concept of the cooperative does not cease to show the power of numbers and more importantly how much resources we have lying dormant around us.

In addition, this column has argued that our problem is not a lack of funding  but a lack of organisation – when we get organised the money comes, as if by magic.

I learnt that there are at least 30,000 SACCOS in Uganda, the majority formed opportunistically to take advantage of government largesse. I am willing to bet only a handful of these will be alive and thriving a decade from now, because money is not the problem but organisation.

While channeling money through SACCOS is not a bad idea, it’s the execution that dictate the suboptimal results that will arise.

The apex body of the SACCOS Uganda Cooperative Savings & Credit Union (UCSCU) is building a liquidity fund that is building capacity to operate as lenders last resort to the industry. The more efficient thing may have been to deposit the funds with UCSCU, encourage citizens to sign up with their nearest SACCOS to access these funds.

At least two outcomes would have been achieved with this approach, a strengthening of the sectors ability to self-regulate through UCSCU and strengthening of existing SACCOS. As it’s now the resources – a few billion shillings, have been scattered helter-skelter across the countryside defeating the intended purpose. Once the dust settles the cream will rise to the top as the poorly organised SACCOS collapse, and their members having appreciated the benefits of the SACCOS join the more credible SACCOS. A process which would have been shortened had we designed the program better.

Currently regulation is in limbo. Under the urgent law the largest SACCOS with savings of more than sh500m are supposed to be supervised by the Bank of Uganda, on the surface a good idea but deeper analysis a potentially disastrous move.

Given the growth of the sector the need to safe guard member savings at the bare minimum is a critical one. However, the central bank has neither the capacity nor the temperament to regulate SACCOS.

Currently there are at least a few dozen SACCOS that have savings of more than sh500m – and growing, this supervisory load will be added to the 20+ commercial banks Bank of Uganda already oversees. While it is correct the central bank should have more than a passing interest in the sector their direct supervision is not necessary nor desirable.

Across the border in Kenya, which has more developed SACCOS than we do, a separate regulator was created which has stabilised the sector and ensured its continued growth and development.

Central bank regulation as it is designed now serves to increase costs of compliance and shut out those who are already excluded from the financial system.

Seven years ago this column reported that Wazalendo had made a surplus of sh12b off assess of more than sh150b. Going by this number they have grown six fold in the interim. While they are not a proxy for the industry, they are an example of the possibilities the sector holds.

Planners and regulators need to take a long term view of the sector to not shackle them at the same time prevent the worst excesses that happen when mere mortals come into contact with sackfuls of money .