It was amazing to listen to the sentiments of people who were calling in on one TV talk show while discussing issues of microfinance in Uganda.
Many callers had concerns over microfinance institutions are charging exorbitant interest rates of up to 100% in name of cost recovery, others complained of their property being sold off and how they are being made poorer yet all these institutions have a social mission. Those few voices represent thousands of people who have similar sentiments but do not have a platform to raise them.
Microfinance is about providing financial services to the poor who are not served by the conventional formal financial institutions.
However many unscrupulous microfinance institutions are forgetting their social mission and are taking advantage of the ignorance of the poor. Others are taking advantage of lack a regulatory framework of these tier four institutions to swindle unsuspecting people of their hard earned resources.
Lack of an established policy framework has created gaps in the microfinance policy and microfinance laws to protect members' savings. Due to lack of clear roles and duties of those responsible for supervising microfinance providers; members lack information on performance of these institutions and this has greatly increased the chances of lose of savings in case the institutions collapsed especially the SACCOS.
It is good that there is an upcoming microfinance conference where they state that the objective is to provide a platform for microfinance stakeholders to discuss pertinent issues and agree on new strategies of deepening and increasing access to financial services.
The conference ought to further seek views of consumers so that this can feed into the discussions during the conference. It is my wish that the conference comes up with clear strategies that will change the face of microfinance in the country.
The government has highly promoted microfinance as a channel for poverty eradication and has been emphasised in many government policy documents such as the PEAP, the medium term competitiveness strategy, the plan for modernisation of agriculture and the National Development Plan (NDP).
But there is still lack of empirical evidence regarding the success of this initiative. The data available is still scanty and it is, therefore, time for microfinance institutions to measure their social impact.
And as strategies for monitoring the social impact of these institutions are drawn, there is a critical need to monitor their financial performance and give feedback. This would increase confidence of consumers and will minimise loses of people's savings.
Similarly regulation for these microfinance institutions should enacted because it would give codes of conduct to be observed and guaranteeing transparency and redress to consumers. Institutions would have to establish and publish their charges and operational results and this would protect consumers from loss of their funds.
To me, those are pertinent issues that should be given much time during the upcoming conference otherwise even if the government pumped lots of money in these MFIs but when the confidence is not reinstated, there won't be visible change.
The writer works with AMFIU