Government to further strengthen financial support to saving groups

The government has promised to continue capitalizing on the Microfinance Support Center to enable it to fulfil its mandate of lending to SACCOs and Village Savings Loan Associations (VSLAs) at competitive rates.

According to the government, capitalization will also enable the government to partner with stakeholders and work together to ensure wholesale lenders in microfinance are well organized, properly capitalized and able to lend at affordable rates.

The Vice President, Jessica Alupo, who was representing the President at the Microfinance and Savings Groups Conference at Hotel Africana in Kampala, highlighted that the funds will be disbursed through Uganda Development Bank to medium and large-scale businesses in industry, export and tourism.

“Microfinance groups should organize themselves to take advantage of and access these funds linking their activities to UDB’s priority areas. When it comes to accessing finance, small businesses are often left out. This is a missed opportunity. Small businesses have huge development potential, in part because they employ so many people,” she said.

Alupo noted that there are estimates to show that more than two-thirds of employment in Uganda is concentrated in businesses with fewer than 10 employees and Conditions for accessing credit for these small businesses are currently too burdensome.

“The few avenues of credit which are available to them are expensive. Small businesses often face average interest rates as high as 24%. The stakeholders in the financial sector should come up with innovative solutions to this challenge,” Alupo explains.

According to Alupo, access to finance is the lifeblood of economic development, and without affordable loans, people cannot start enterprises, hence businesses cannot invest in their growth and opportunities for product innovation are lost.

She, therefore, ensured that the government is to increase access to finance, by setting up 10,594 new SACCOs, through the Parish Development Model, offering affordable loans to millions of Ugandans to help them escape subsistence agriculture.

“Access to finance is at two levels. The first is at the household level. All Ugandans should have access to affordable credit to invest in profitable family enterprises. According to the latest data, only 19% of adults in Uganda have borrowed from a formal financial institution in the last year,” she noted.

The Microfinance and Savings Groups Conference brought together government and stakeholders from the industry within and outside Uganda to discuss critical matters and build consensus on the future of the microfinance and savings groups in Uganda.