Co-operators condemn ‘confused’ regulatory regime

Co-operators in Western Uganda have condemned what some referred to as a “confused” regulatory regime resulting from the enactment of various laws meant to regulate the operation of cooperatives, SACCOS in particular, within the country.

The co-operators expressed their discontent during a regional forum on the changing regulatory environment for SACCOs in Uganda. The forum, which was held on Wednesday last week, brought together more than 100 leaders of cooperatives in Western Uganda, including board members, supervisory committee members, members of vetting committees, and other management staff.

According to Dr. Sylvester Ndiroramukama, Chief Executive Officer, Uganda Co-operative Savings and Credit Union (UCSCU), the discussion focused on how to harmonize the different regulations that affect the operations of SACCOs in Uganda.

“We want to bring to the attention of our members the implications of the regulations in the gazetted various sections of the Cooperative Societies Act and the Tier IV Microfinance Institutions and Moneylenders Act, 2016,” Ndiroramukama explained.

Besides the Cooperative Societies Act Cap. 112 by which all cooperatives are governed, SACCOs are now also governed by the Tier IV Microfinance and MoneyLenders Act, 2016, and the Microfinance Deposit-Taking Institutions Act, 2003.

The law further subjects SACCOs to the governance of-the Uganda Microfinance Regulatory Agency (UMRA) and Bank of Uganda, by which they are required to be licensed, in addition to being under the oversight of the Registrar of Cooperative Societies, under the Ministry of Trade Industry and Cooperatives (MTIC).

“Suffocating cooperatives”

Elaborating on the regulatory situation of SACCOs in Uganda, participants at the forum argued that the stringent regulations subjecting the sector to a variety of actors could have the effect of “suffocating” cooperatives.

Ndiroramukama says that as co-operators, they are advocating for a single regulator for the sector, and an independent authority in charge of licensing, regulating, and supervising SACCOs.

“We don’t care who that single regulator would be but what we want is for the SACCOs to enjoy the benefits of backward and forward linkages,” he said.

Ndiroramukama anticipates the collapse of several SACCOs in the country if the issue of multiple regulations in the sector is not sorted out in time.

“Definitely if the status quo remains, SACCOs will die and this is why we are bringing it to the attention of the government that the current laws conflict against each other,” Ndiroramukama said.

Stephen Bongonzya, the vice-chairman of UCSCU, revealed that the different regulators are jostling for control over SACCOS, something he thinks could be injurious to the cooperatives. He too believes the legal regime as it is could spell disaster for some SACCOs.

“The Microfinance Deposit-Taking Institutions Act regulates companies meaning that some of the SACCOs that cross will automatically become companies, and you can never be allowed to slide back. In case of issues, Bank of Uganda will either advise you to merge, be bought or end up collapsing, which is the reason we are insisting that they remain as SACCOs,” Bongonzya explained.

Sort us out, or else…

Some of the attendees at the forum threatened to stage a strike if the law is not rectified to have a single regulator for all cooperatives.

“We had several discussions and made recommendations, but our submissions were not considered when amending the Act? Are we now orphans? If we don’t have any ministry that is concerned for our affairs, this is the right time to start a strike to retain our identity as SACCOs,” a tough-talking staffer of Kitaga SACCO fumed.

However, the CEO of UCSCU, urged the co-operators to desist from any talk of violence, saying they will use non-violent processes to bring about the desired harmony within the cooperative laws.

“We are not going to strike because as co-operators we don’t believe in violence; we are democratic and law-abiding institutions, which is why we use the approach of engaging and petitioning, which doesn’t involve using excessive force or violence,” Ndiroramukama said.

Rev. Can. Duncans Mugumya, the Board Chairman, Jubilee SACCO (West Ankole Diocese), also urged calm, calling instead for engagement with lawmakers, saying, “The existing law was passed by human beings and can just as well be changed be the same.”

Prominent among the issues raised by participants were the number of licensing and supervisory agencies, and the mix-up of funds, among others. that were petitioned to the speaker of parliament.

The UCSCU officials reported that they had petitioned Parliament about the issues of concern to cooperatives.

“We have raised the contradictions with the Office of the Speaker of Parliament through a petition, and she has already written to the relevant committees of ministries to ensure that they harmonize these inconsistencies in the two laws,” Bongonzya said.

Spilled milk

However, a cross-section of the co-operators in attendance likened their peers’ complaints to crying over spilled milk, saying the time for protest is now long past, given that the offending law is already in place.

“I think we should comply with the law. We should have defied when it was still in preparation, but now that it’s already amended it’s a challenge to overcome. We can instead adopt amicable means to resolve the gaps within it,” argued Charles Muramuzi, one of the participants.

Muramuzi also opined that some of the resistance to the new legal regime is born of fear by SACCOs that have till now been non-compliant with existing regulation.

“The problem is that we are fearing change vis-à-vis compliance because these new regulations are very strict with regard to compliance, and yet we are not doing what we are supposed to be doing as SACCOs. But if we accept these laws, then we can benchmark and grow like any other successful cooperatives,” he said.

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Kakumiro bee farmers resolve to form SACCO

Bee farmers in Kakumiro district have resolved to form a SACCO in a bid to address some of the challenges they face in their enterprise.

According to Joseph Serugo, a bee farmer and conservationist with Kayirebwa Chimpanzee Conservancy, since 2010 he and other farmers have been using traditional methods to make beehives and process their honey, but they want to adopt modern ones come April.

In addition, the farmers intend to set up a SACCO with a central collection point where members can bulk their honey that they would then sell at a fair price.

“Plans are in high gear to organize for the modern beehives and establish a SACCO so that things like marketing improve. We are currently earning very little for our honey,” Serugo told theCooperator.

“We are currently earning very little for our honey,” Serugo told the Cooperator.

Serugo, who says he currently earns about Shs 500,000 each season from honey, believes the increased investment in the business will attract more customers and boost his earnings.

Sarah Katono, also a bee farmer and member of the same group, says a SACCO would save them from having to borrow from external lenders who tend to levy prohibitively high-interest rates.

“I want to be able to purchase machines to harvest wax from my bees and add value to it by making items like candles. I am unable to do that currently because the money I get is not enough,” Katono said.

She also hopes that the SACCO can help members push for better honey prices and improve their livelihood.

“I sell my honey at between Shs 5,000- Shs 10,000 to middlemen and also individual customers who buy for their own consumption but I would like to earn more from it,” she said.

Meanwhile, William Lalobo, a private conservationist at Aswa Falls Conservancy and a beekeeper, plans to extract bee venom for export.

“I have already received the machines and will soon begin extraction of the venom,” Lalobo says.

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Lyamujungu Cooperative reinvests all dividends to settle outstanding loan

Members of Kabale-based Lyamujungu Co-operative Financial Services Ltd have resolved to reinvest all their dividends in order to absorb the effects of the COVID-19 pandemic that has affected many financial institutions in Uganda.

The decision was made during the cooperative’s recent scientific Annual General Meeting (AGM) held on Saturday, October 17, 2020.

According to the cooperative’s General Manager, Dicky Byamukama, the successful extraordinary annual general meeting held at Kizinga Church of Uganda, was attended by over 100 delegates and all the board members.

“To observe the COVID-19 SOPs, management was represented by branch managers and senior management staff. We did not compromise on the social distancing aspect either,” Byamukama said.

He confirmed that during the AGM members unanimously agreed to recapitalize Shs 235m dividends as part of their share capital to boost the cooperative’s growth.

“All members appreciated the advice from the supervisory committee where every share had generated 1000 shillings as dividends and they resolved to recapitalize those dividends,” Byamukama explained.

He, however, reported that some members had rejected the idea until the District Commercial Officer (DCO), Erasmus Natumanya advised them on the importance of reinvesting dividends at this material time.

“Definitely it was a big debate but our guest of honour (DCO) added his voice in instilling the purpose of saving dividends.”

He adds that the reinvested dividends will enable the cooperative to settle a loan worth Shs 500mfrom the Microfinance Support Center, of which Shs 350m remains unpaid.

The General Manager noted that the cooperative’s financial activities have been greatly affected by the cross border conflict between Uganda and Rwanda

“Actually we have suffered much since most of our members had businesses in Rwanda which were affected. As a result, many are no longer saving nor are they picking loans for business investments,” Byamukama said.

He says the cooperative is looking forward to acquiring land titles to protect, secure and safeguard the cooperative’s capital assets

“There should be modalities put in place to ensure that all our land gets titles to avoid instances of land grabbing which is a common practice today.”

Kabale District Commercial Officer, Erasmus Natumanya advised that delegates be availed with by-laws to guide them in cooperative legal frameworks.

Robert Asiimwe, a representative from Uganda Co-operative Alliance thanked delegates for patronizing their cooperative.

A leading cooperative

One of the leading cooperatives in South Western Uganda, Lyamujungu Co-operative Financial Services Ltd (LCFSL) started in August 1984 with 16 members.

It was registered by the Registrar of Co-operatives in 1990 under Reg. No 5695 and mandated to operate within greater Kabale District.

Currently, it has 7 branches and four outreaches, with a total of 23,000 members, total savings of Shs 4.1bn, total share capital of Shs 3.05bn, a net surplus of Shs 301m, and a loan portfolio of 8.2bn.

According to its General Manager, Lyamujungu is keen to convert into a Microfinance Deposit-taking Institution (MDI) in the next 5 years.

“Through this new law where Bank of Uganda is to take on some cooperatives in terms of supervision and guidance, we see Lyamujungu getting promoted to a Tier 3 MDI,” says Byamukama.

He urged the cooperators to improve on their savings and buy more share capital to anticipate further institutional growth and support.

“There is need to encourage our members to develop a saving culture in a bid to foster the SACCO’s operations for growth and development.”

He, however, warned its members to desist from multiple borrowing that has resulted in poor loan repayments.

The meeting also recommended that capital expenditures be minimized until the financial environment normalises.

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