SACCO is the acronym for Savings And Credit Co-operative.
I had never heard of this acronym before coming to Uganda. While in Kabasheshe, on at least two occasions, I had seen signs with such a reference on them.
I had asked my family if there were any nearby and if they could take me. They told me of one in Rusoka, which a friend worked at. We planned to arrive there on Wednesday.
The walk through Rusoka was interesting. We passed a vocational training center and a primary school for orphans. There were some exposed water pipes next to a hand pump, indicating previous scavenging. Beside some business and across from a hair salon, we arrived at the Turibamwe SACCO in the center of town.
The building wouldn’t be that noticeable – one-story, concrete walls, with a small amount of white paint – if it wasn’t for the high level of security that comes with a high level of money changing hands. I walked under their slogan of “Save & Invest in the Future” to see the familiar sight of cashiers to the right and management to the left. There were four or five patrons sitting next to the SACCO’s armed security guard. They were busy but seemed to welcome the excuse to take a break and talk.
Judith, my host sister, spoke with Susan, one of the two cashiers behind the wooden and glass divider, and asked her if I could speak with someone to learn more about how this institution operates. We moved towards the back room.
Sitting there was Carol, an accountant and the person who was willing to answer my questions. After talking with her and feverishly writing down points into my iPhone, I learned nearly everything about this SACCO.
The SACCO began nearly a decade ago, back in 2006, and has already grown to have a second branch, opened 3 years ago. Unlike a typical bank, a SACCO consists of members who are, in effect, the owners. Rather than maximizing profits, it operates to serve the community. They are accommodating to a range of needs and often offer lower interest rates that normal moneylenders.
Although we have a similar financial structure in North America with credit unions, the thing that surprised me about this SACCO was that it was the only place where people could get credit. There were no banks in Rusoka or in Kabasheshe. Without a SACCO, people would be limited simply to what they could produce and sell, unable to ever lend money (at a reasonable rate) to improve their lives.
What services are provided by the SACCO?
At the most basic level, a person can deposit money into the SACCO without having to become a member; but this excludes them from accessing other services. The more common approach is to become an Individual Member. This requires depositing 26,000# (26,000 Uganda shillings, or about 10 US dollars). The money goes towards membership (10,000#), stationary to keep records (6,000#), and shares in the co-operative (10,000#). A group or pair can also open an account; this type is similar to the individual member with the membership fee costing an extra 10,000#.
For members with money to spare, the SACCO also offers a Fixed Account option. This allows a member to earn money by leaving money in the coffers. If a person can let some amount sit untouched they will get back 1% interest per month. Fixed accounts are as little as 2,000# or over a million shillings; it’s up to the member.
What can a loan be used for?
By having a membership with the SACCO, an individual, pairing, or group is now one step closer to acquiring a loan. I was quite astonished at the breadth of items that qualify for a loan. Taking a loan to buy farmland or to build a business make sense enough, but the co-operative also allows people to pay for their children’s school fee, make home improvements like solar power or piped water, and even for luxuries like satellite television. All of these come with a 3% monthly interest rate. The lower rate of 2% is for motorcycle loans, typically used for someone who will start a boda-boda moto taxi service. The loans are additionally unique in that a loan officer will be the one collecting the item, not the loan signer; cash is never exchanged. Whether your loan is for business or pleasure, the maturity will be between three and twelve months, depending on what the client wishes.
How much are the loans?
“It all depends on the number of shares”, Albert explained to me just after he entered the room. Albert is a loan officer and entered the room midway through my flurry of questions.
Shares are bought and sold by the members. To qualify for a loan, a member must have a minimum of 3,000# in shares. They must also have an active account, making deposits and withdrawals, and wait at least six months after opening their account. Once these requirements are met, a member can apply for a loan. The 10,000# in shares that each member receives initially are multiplied by a factor of eight, meaning that a loan of 80,000# is available. If a larger loan is needed, a member simply needs to buy more shares and will then be able to apply for a loan eight times in size.
Are there any risks?
This was the last question and one I thought was crucial to the co-operative’s success.
The SACCO has two methods to making sure re-payment of the loans is successful. The first, as Albert explained succinctly, is to have the member receiving the loan to put up collateral. This is normally some asset – land, livestock, or possession – of real value, usually near twice the value of the loan. But cows can move. This is problematic if a loan is based on a movable commodity as collateral. So, the SACCO has a second device. This is family.
In addition to the member signing the loan, a co-signer, usually a family member, with also attach their name. That way, if the original signer does anything shady, like sell some assets after receiving their new motorcycle or other item, the family will have to become involved. It means that the SACCO has more oversight and the most powerful kind in one’s own family.
I left by thanking everyone for their time and patience. They thanked me for coming by and let me know that I was always welcome to open an account, even in the future.
Susan walked me out to the front courtyard, reminding me that they are “open Monday through Friday, from 8:30 to 4:30” before saying goodbye.