Whatever we do, we must not let Saccos die off due to bad governance

Sunday January 27 2019


 Most SACCOs became unable to serve a section of their members who are mostly low-income residents without access to formal banking services. PHOTO | FILE 

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The government is to deploy a team to help recover Savings and Credit Cooperatives (Sacco) members’ contributions, currently held by loan defaulters or otherwise lost through fraud and embezzlement, Rwanda Today has learnt.

The multi-agency team will include officers from Rwanda co-operative agency, Central Bank, Rwanda Investigation Bureau, Rwanda Public Prosecution, Ministry of Local Government, and Ministry of Finance.

Saccos are expected to enhance access to finance and boost financial inclusion at the grassroots levels. But, how can they achieve their strategic objective when they continue to be mismanaged in spite of several reforms initiated to improve their performance?

For example, in 2015, the government announced it would help Umurenge Saccos at sector level to consolidate assets and form district saccos.

While this helped Saccos to mobilise more savings and extend credit facilities to their members, persistent mismanagement is undermining progress and threatening their existence.

There is a need for law enforcement agencies to investigate and punish those who are involved.

Often, some Sacco officials disappear with funds and no follow up is done to ensure recovery.

Instead, members are expected to count their losses and move on. This not only undermines confidence in Saccos but also pushes vulnerable members further into poverty.
Decisive action is required if the contribution of Saccos in financial intermediation is to be maintained.

Strengthening good governance is a necessity in the quest for excellence that will build on the strong foundation of cooperative societies.

Current policy and laws governing co-operative societies should be reviewed to deal with the challenges that threaten to cripple the co-operative movement.

Saccos should also consider paying interest to members on their savings using the prevailing banking market rate. Payment of interest on members’ deposits will likely influence some members with excess cash to deposit with Saccos.

Saccos should not only encourage their members to borrow cash from them but also assist in identifying the best and viable investment opportunities in order to minimize risk of business failures.

The most important economic function of financial intermediaries is to enhance mobilisation of savings and provide loans to its clientelle. Mobilisation of savings must be accompanied by a safe place for both members and non-member savers.

The provision of credit has increasingly been regarded as an important tool of raising incomes and alleviating poverty.

But perhaps more importantly, the management of Saccos needs to be overhauled to foster confidence among members. The current challenges restrict the extent to which they can effectively and sustainably satisfy the credit needs of their members and improve their livelihoods.