Inspired by co-operation in Manchester to set up savings and credit in Uganda

Luke OthelloWhen a young Ugandan named Luke Othello visited Manchester in 2006 for a youth conference organised by the Co-operative College, it inspired him to set up a savings and credit co-operative in the sugar factory where he worked in Uganda. Kinyara SACCO is growing steadily and now has 800 members, with Luke keen to promote the importance of savings.

Sally Hartley, a PhD student from the Open University and Co-operative College, who is currently in Uganda researching youth engagement with co-operatives, tells the story of Kinyara SACCO, as well as some of the challenges they still face:

The Young Co-operators Forum brought together young co-operators from around the world to share ideas and experiences and enable them to go back home and start or improve their own co-operatives. The programme included visits to different co-operatives in Manchester, the Rochdale Pioneers Museum and other sites of historical interest. Luke was inspired by the level of co-operation he found in Manchester and the presence of co-operatives – the CIS tower, various co-operative buildings, the big co-operative businesses and the long history of Co-operatives in the UK, remarking that he found ‘the people of Manchester very much co-operative’. Luke also learned a lot about how savings and credit co-operatives work in practice, convinced that co-operatives mean ‘you are able to do what you cannot do alone’.

At the time, Luke was working for one of the big sugar companies in Uganda – Kinyara Sugar, which grows and processes sugar near the North West town of Masindi. There are banks on the factory ground where workers can open an account and get interest, but interest rates are often high. Luke approached the managers of Kinyara Sugar explaining how SACCOS (savings and credit co-operatives work), emphasising that members would be encouraged to save first before taking credit, which in turn would enable them to pay back loans more effectively. He also explained that the SACCO would be able to provide loans at lower interest rates than commercial banks. The management were convinced of the value to this approach and gave Luke a room to set up the SACCO in 2007.Luke and the Chair outside the SACCO office

Luke then had to find people to volunteer their time to be part of the board that would oversee the set-up and then the running of the SACCO. Patrick, a fellow Kinyara Sugar employee who had completed his diploma at the nearby Uganda College, had past experience and a passion for co-operatives. Both Luke and Patrick were committed to establishing a SACCO that was member owned and controlled, independent of outside interests, and were aware of some of the problems SACCOs in Uganda had faced in the past; SACCOs were often SACCOs in name but not in nature and could often not resist the pressure of external interests, meaning members lost their money and faith in the SACCO system. Luke and Patrick, therefore, decided to make the co-operative values and principles central to how Kinyara SACCO was run.

Initially, Luke acted as cashier, manager and accounts clerk, as well as continuing his job at Kinyara Sugar. However, as the membership and demand for accounts and credit grew, more staff were needed. As membership fees, share capital and savings had also grown, Luke  could afford to employ full time staff and in September 2009 a manager, cashier and loans officer joined the team. Luke stepped back from the day to day running of the SACCO and is now Treasurer on the Board.

SACCO staff in front of Kinyara SugarKinyara SACCO has arranged with Kinyara Sugar Company that repayments for loans will be taken directly from the payroll for employees of the company. This is a huge benefit for the SACCO as it means it does not have the problem of members defaulting on their loans. The SACCO also recognised the need to offer membership to the surrounding communities, consisting mainly of farmers who are in need of credit to invest in their farms, even though they generally save less and find it harder to make the repayments.

Kinyara SACCO now wishes to increase its membership to enable it to increase the amount of capital it has to provide credit – it currently does not have enough resources to meet the demand, due to the relatively low level of savings members deposit with the SACCO because wages are low, people have little money to save and there is a poor ‘savings culture’ in Uganda. Kinyara SACCO is, therefore, committed to trying to provide sensitisation and training to its members so they understand the importance and benefit of savings. Kinyara SACCO’s other option is to take a loan from outside, but it are waiting to find the right partner – it do not want to be exposed to high interests for a loan which they would then have to pass on to its members, or become more like a commercial bank.

Kinyara SACCO still faces practical challenges. The room it operates in, which holds four staff with a small bench for members to wait their turn, is about five metres by four metres. The SACCO also needs a safe as it currently has to keep cash in the drawer.Accounts clerk in Kinyara SACCO office

Despite these challenges, the future is bright, due to the central place of the co-operative principles in the way the staff plan and manage their SACCO.

Rebecca Forecast also attended the conference whilst a student at the University of Birmingham and member of the Midlands Co-operative Society. She found it inspiring to learn about the scale of the global co-operative movement and, as a student of African studies, was particularly keen to explore the role of co-operatives as alternative, sustainable models for co-operating out of poverty. Rebecca went on to complete an MA in Development Studies and now works as Programme Assistant on the Co-operatives for Development Programme at the Co-operative College, which works to promote co-operative solutions to poverty through research, training and policy advice.

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