The Observer (Kampala)

Uganda: Microfinance Centre Offers Cheap Credit

Organised groups in Uganda have been urged to consider applying for affordable credit from the Microfinance Support Centre (MSC).

Meeting journalists at Metropole hotel in Kampala last week, MSC Executive Director John Peter Mujuni said the company had a lot of money to give out yet demand for it was low.

"We lost some donor partners, but now with new management, they trust us and they are back - especially the African Development Bank, and they are playing their part," Mujuni said.

"We work on demand and we want people to come and take this money," he said.

MSC had bad publicity around 2011, with some of its former directors fingered in fraud investigations. It is now looking to win back the trust of Ugandans. In presentations to journalists, MSC showed success stories of ordinary Ugandans' groups that they have supported with loans.

Some Saccos have grown from just holding a paltry Shs 1m to more than Shs 5bn in loan portfolio, thanks to MSC's loans. MSC only lends to organised groups like village Saccos, cooperative unions, cooperative enterprises, microfinance institutions, producer and marketing cooperatives, and small and medium enterprises.

Loan charges range from nine to 16 per cent annually depending on the business. Wilson Wamatsembe, MSC director for business development and corporate affairs, said there was no security required for those borrowing less than Shs 100m.

For cooperatives borrowing above Shs 100m, he said, they must have collateral.

"When money is a lot, people are most likely to find it hard to pay back," Wamatsembe said.

Since 2001, when MSC was formed, it has given out Shs 160bn in loans to more than 1000 clients - 87 per cent of these being Saccos.

Interference

Often, when MSC disburses money, especially to the district Saccos, district and Sacco leaders use their influence to take the money instead of giving it to the members. Unfortunately, MSC can hardly go down there to supervise the money.

The most recent auditor general's report for the year ending 2011 shows that in Ibanda district, for instance, the district commercial officer had several memberships in district-supported Saccos, where he borrowed money and never paid back. In Rakai, the LC-V chairman borrowed Shs 4m from one Sacco there, but he never repaid it.

In Kiboga district, Premier Investment Ltd received Shs 50m from MSC in 2010. However, the chairman and members of the board allocated themselves Shs 43m. And in Ssembabule district, the Matete sub-county LC-III chairman, who was doubling as the chairperson of the board for Taala Ya Mawogola Sacco, colluded with the manager and treasurer of the Sacco to fleece members of Shs 600m in June 2011

MSC admits that its biggest challenge is here. The money is usually taken by district leaders, Sacco leaders, and cultural leaders, among other influential persons, where the Saccos are located.

Despite such hurdles, MSC won't stop giving out money. In the first quarter of this year, the company has already given out Shs 10bn. Soon, MSC will announce its 2013 performance results with a loss of more than Shs 2bn due to defaulters, according to the company officials.

"Our role is to [withstand] all these risks as long as we can give people money to develop themselves," ED Mujuni said.

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