Kampala — Members of a credible SACCOS attend a meeting in Nyabushenyi, Ntungamo. There are fake credit societies that fleece unsuspecting clients of their hard earned money

I received information from Magumba that we could get rich if we deposited money in new SACCOS," says Sam Isabirye, a boda-boda rider. This was in May 2008. He had just bought a new bike. SACCOS are Savings and Credit Cooperative Societies.

"I bought the bike at sh2.6m two weeks before. I sold it at sh2.2m because I wanted to get rich," Isabirye says. He deposited the money at Together Each Achieves More (TEAM).

"I expected to be called for my money at least two weeks later," he recollects. Every time he visited the TEAM offices, he was told to wait because the 'funds from Europe' had delayed.

Isabirye is one of about 4,000 people in Busoga region who lost at least sh2.4b to TEAM. The group directors closed the business in September.

There are many other organisations disguised as SACCOS whose intention is to fleece unsuspecting Ugandans of their money.

The actual number of SACCOS is not known. The registered ones number over 4,000. This includes around 1,000 that were set up in preparation for the prosperity-for-all programme.

In the case of Jinja, the organisation was not even registered at the Registrar of Companies as TEAM. It was registered as Dutch International Limited, according to Registration Certificate 85683 and Dutch International Beneficiary Policy, according to registration 155603.

TEAM first opened in April 2008. Although it marketed itself as a non-profit making group funded by good Samaritans from abroad, TEAM operated like a multiplier money scheme in which clients expected to get rich quickly.

"We were told that if you deposited any amount, it would be multiplied by three in one month," says Samuel Kigabula, a client. He deposited sh1m after selling his motor bike. He had earlier parted with sh1,500 for an identity card and sh25,000 for subscription. With at least 4,000 people paying, TEAM collected at least sh100m.

Some people were actually paid by TEAM. But economists say, this is a tactic. "They pay some people, who in turn spread the gospel," says financial consultant Stuart Ssetimba.

In reality, they pay back less than 20% of all collected deposits. Investigations reveal that to every 10 people who deposited money with TEAM, only one person was paid.

"It was a pyramid scheme, under which deposits of new clients were being used to pay off the first clients. When the number of new people registering reduced, funds to pay off earlier depositors also reduced. I suspect that is why it was closed," says Ssettimba.

Kigabula says he knows people who deposited sh13m and got nothing. This reporter managed to track down a civil engineer who diverted funds from the company he works for.

"I was convinced by a friend who was paid sh6m after depositing 2m," he says. He says his bosses have not yet found out about the missing funds.

Interestingly, most of the directors of TEAM were former directors of COWE, an NGO that cheated people out of their money.

Under the prosperity-for-all programme, there should be at least one SACCOS at every rural sub-county. Members are supposed to pay not more than sh10,000 for registration. However, in many sub-counties, there are more than three, each claiming to be the legitimate one.

One of the reasons fake SACCOS thrive is people's ignorance, for example clients not scrutinising 'official' papers.

"I did not bother about whatever papers these people had. All I wanted was to get rich quick," Isabirye says.

A research by Financial Sector Deepening Project, shows that more than 52% of SACCOS members did not know their rights in the management of SACCOS.

Fake SACCOS also thrive because clients frustrate the efforts of authorities.

"I tried to stop the operations of the TEAM in July, but the clients stopped me," says Christopher Bagonza, the Jinja Resident District Commissioner.

Before COWE was officially banned, the clients tried to stop the Government from banning it. That was around 2002. It was finally banned after President Yoweri Museveni ordered the internal affairs minister, Ruhakana Rugunda, to make sure that the officials were arrested.

A research by Bank of Uganda (BoU) in 2007, shows that two out of three SACCOS collapse a year or two after they are started. This is due to poor governance, fraud and mismanagement of funds, failure to balance between social and commercial missions and inadequate loan capital.

Financial analysts say one of the signs of fake SACCOS is the abnormally high returns they promise, or when they claim to have sponsors abroad.

There is also no proper legal framework and supervisory system for SACCOS. The 2003 Micro-Finance Deposit Taking Institutions Act, says only SACCOS licensed with BoU are supposed to take deposits.

The Bank Of Uganda public relations officer, Juma Walusimbi, urges Ugandans to check that the SACCOS they register with are legitimate.