Microfinance Minister Moots Establishment of Cooperative Bank to Neutralize Loan Sharks

The State Minister in Charge of Microfinance; Haruna Kyeyune Kasolo is mooting for the establishment of a cooperative bank to save small enterprises the burden of exploitation under the high-interest credit facilities.

According to Kasolo, many small and midsized enterprises are struggling to operate or even failing to break through, mainly due to a lack of reliable sources of affordable credit facilities to support their growth.

While addressing a local council leaders’ sensitization meeting in Masaka Lwengo district, on the Presidential Wealth and Job Creation initiative, commonly known as Emyoga, Kasolo revealed that his Ministry is considering establishing an apex bank for all cooperative societies and unions, as a solution to the long bureaucratic tendencies and high-interest rates embedded on loans offered by commercial banks.

He indicates that their assessments have established that besides that the exorbitant interest rates, many micro and midsized business operators are also frustrated by the high-value collaterals, among other inconsiderate conditions on the loans obtained from the commercial banks.

Kasolo prefers that it's high time the different cooperatives are mobilized into their own bank, which will meet their credit and capital needs and provide a direct link through which government can capitalize on them.

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Records at the Uganda Cooperatives Association indicate that by the year 2021, Uganda had 18,000 registered cooperative societies with a membership of at least 7 million people. The majority of these cooperatives operate as Savings and Credit associations on top of other benefits of collaboration that they present to the membership.

According to Kasolo once these groups are organized into a cooperatives bank, it can provide the government with a better alternative through which it can channel all its capitalization initiatives targeting the ordinary people.

He argues that apparently some of the funds that the government commits to some capitalization programs such as the Agriculture Credit Facility-ACF and the Youth Venture Capital Fund-YVCF, remain unutilized in the commercial banks as a ploy to exhaust their own internal credit facilities.

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Ibrahim Kitatta, the Lwengo LCV Chairperson says the idea is long overdue indicating that many cooperative societies at grassroots levels have been devoured by commercial banks and other exorbitant money lenders to whom they are currently running for credit.

He is optimistic that once well organized and substantially supported with a robust regulatory framework, financial resources, and training, the cooperatives are a potential vehicle for rural economic transformation.

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Notably, a Cooperatives Bank once operated in Uganda since the 1960s but closed shop in 1999 after the government adopted a major economic policy shift to privatization in what is famously known as Structural Adjustment Programs that was agitated by the World Bank and the International Monitory Fund.