Govt should take a closer look on SACCOs

Govt should take a closer look on SACCOs

A great deal of optimism surrounds the impending disbursement of "prosperity for all" (Bonna Bagaggawale) funds, but a closer shows that some important issues may have been ignored.

According to the government master plan for the programme, the funds will be distributed by Post Bank through Savings and Credit Cooperatives (SACCOs). So many SACCOs, as a result, have sprung up with the aim of taping into the government coffers.

Although distributing funds through SACCOs is a good idea considering risks associated with funding individuals, lack of a well laid-out regulatory framework to control activities of SACCOs is rather worrisome.

There is no clear policy on what entails the formation of SACCOs as long there is a group of willing individuals ready to come together to form a cooperative organisation.

Issues of regulation and control are paramount for the performance of any industry. However, the manner in which SACCOs operate if not well monitored can be a recipe for disaster.

In July 2006, hundreds of people lost their savings after Caring for Orphans Widows and Elderly (COWE), an obscure NGO operating in Kabale, closed shop nine months after it had commenced operations.

Although registered as an NGO, COWE operated more or less like SACCOs for it encouraged its members to save with the organisation, there after access loans and share profits accumulated thereafter.

The organisation whose membership was close to 1, 700 did not work as promised. One morning of July 2006, members of the organisation woke up to an empty office after the organisations directors closed and disappeared with millions of shillings in member savings. Police is still hunting.

The demise that befell members of COWE has since remained a black spot in the minds of Kabale residents regarding operation of SACCOs. And it is such kind of apprehension that greets government’s bonna bagaggawale (prosperity for all) programme as it rolls in areas that once had no access to credit financing.

Experiences in Kenya also show that unregulated SACCOs can easily engage in dubious deals. Some organisations register as SACCOs and later engage in illegal pyramid schemes where individuals are enticed to contribute money with the hope of multiplying their portfolios after more members join.

However the end result of such schemes is the loss of millions of shillings by the unsuspecting public. Government may need to draw some lessons from such experiences to ensure that the past mistakes are not repeated.

It is therefore imperative that government sets up a clear regulatory environment to control the activities of the ever-increasing SACCOs and provide the much-needed security to savings of the rural folks.