This document outlines a 5-year project in Uganda to promote financial inclusion through Savings and Credit Co-operatives (SACCOs) to support inclusive growth. The project aims to strengthen the capacity and operations of approximately 1,000 SACCOs. Currently, many SACCOs have limited institutional capacity and face obstacles like a lack of capital and skills that undermine their sustainability and impact. The project will provide training, technical assistance, and support to help SACCOs improve governance, develop new financial products and services, and become more sustainable and inclusive financial institutions over the long term. This could help more Ugandans access important financial services and support economic opportunities.

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F4DEV. Development Finance Impact Project Assignment
Promotion of Financial Inclusion through SACCOs for Inclusive Growth (5 years) Project in Uganda
a. What is the problem or issue that you are trying to solve?
In 2011, Bank of Uganda (BoU) as a member of Alliance for Financial Inclusion made a commitment under the
Maya Declaration to develop and implement a Strategy for Financial Inclusion based on four pillars by 2013 i.e.
Financial Literacy, Financial Consumer Protection, Financial Innovations and Financial Services Data and
Measurement.
BoU defines financial inclusion as ―usage of either BoU regulated or other formal or informal institutions‖.
Government is trying to make financial inclusion an aspect of its poverty alleviation programs. The objective is to
improve employment and income generation opportunities of the vulnerable and low-income people (V&L-IP)
through increased use and access to a full suite of quality financial services at an affordable costs, in a convenient
manner, and with dignity for the clients‖ This will unlock their economic and social potential through greater
financial inclusion to livelihood diversification and adequate income generation to get them out of poverty (BoU,
2014; AFI, 2011 and World Bank, 2012).
It’s a countrywide project, targeting the population with limited access to financial services, and Savings and
Credit Co-operatives (SACCOs) that are not yet operationally self-sustaining but have the potential of
sustainability, and have successfully demonstrated that sound and appropriate financial services can be provided
to even the V&L-IP of the communities.
Co-operatives (SACCOs) as a policy framework and community-based tool for development provide services
together with financial education and consumer protection to empower the community and foster an environment
conducive to business start-ups or MSMEs spurring among the V&L-IP/households.
At the community level, SACCOs are user-owned (inclusive business) model of financial intermediation, with
both a wide rural/urban outreach to V&L-IP that mobilize local savings and offer loans at low information,
enforcement and operating costs as they understand their customers (Poyo, 2000).
Members typically share a common bond based on a geographic area, employer, community or other affiliation.
Members have equal voting rights, regardless of how many shares they own. Savings & credit are their basic
principal services, though many may offer other services like money remittances & payment services, and
insurance etc (CGAP, 2005).
In the process, they build social capital, financial safety-net and resilience, and provide opportunities for effective
collection action. SACCOs mobilize resources in form of share capital & savings and sometimes external funding,
which resources are used as revolving loan funds to facilitate financial access, manage community-based activities
and revolving and technical management programs. The mobilization is through mutual trust, local knowledge,
inexpensive human resources and social networks within the communities and Co-operatives use the assets of the
V&L-IP which otherwise would remain unutilized.
By June, 2015, there were over 3,000 registered SACCOs providing financial services to the population (Office of
the Commissioner for Co-operative Development, 2015). SACCOs can promote financial and social inclusion
once they are financially sustainable (FSD Kenya, 2012).
The SACCO, not-for profit orientation, aim at providing affordable financial services. To support financial
inclusion, about 1,000 SACCOs will be brought on board to participate in implementing a 5 year rural/urban fund
management programs in Uganda.
This will be provided through an integrated framework approach, by offering financial intermediation products
and other services such as:-
 Savings, credit, insurance remittances and payment systems that do not require subsidies.
 Social intermediation services that build human & social capital, improve the well-being of micro
entrepreneurs (e.g. health, nutrition, literacy training).
 Non-financial enterprise development services, such as business training, marketing and technology
services, and subsector analysis.

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b. What are the reasons that the government, official aid providers or private sector would want to
participate?
The project purpose is to strengthen the roles, capacity and working procedures of about 1,000 SACCOs in
promoting financial inclusion for inclusive growth (i.e. improve their operational &financial sustainability and
advance financial inclusion). SACCOs’ achievements of this goal would facilitate access to financial services and
encourage them to keeping growing. This can be achieved with government, official aid providers or private
sector participation.
The focus on financial inclusion is one of the key strategies of Uganda’s efforts to end poverty in all its forms and
reduce inequality, promote sustained, inclusive and sustainable economic growth, full and productive employment
and decent work for the V&L-IP, hence achieve the 2030 SDGs agenda (Our SDGs Uganda, 2015).
c. What are the main obstacles currently standing in the way of solving the problem or issues you are
addressing?
However, the issues to address relate to:
 Limited institutional capacity (i.e. lack of strategic vision, leadership hence weak governance. Most SACCOs
are small in size which has a negative effect on their profitability and decisive management growth hence
sustainability. Co-operatives in Uganda suffer from a bad public image as certain SACCOs are unable to
protect their members’ savings.
 Lack of human resources and weak value proposition for customers (inability to assess creditworthiness), so
financial reporting & assessment of financial performance is a problem.
 Limited incentives and internal capacity to innovate which lead to limited financial product and services
development for new market segments to increase client values and underdeveloped delivery channels (i.e.
fewer access points & basic infrastructures) by SACCOs to the (V&L-IP) engaged in business activities. Even
the loan sizes extended to clients are too small for business expansion & repayment schedules are not suitable
to business activities e.g. agric. production seasonality and lack of livelihood diversification among members
resulting in non-performing loans problems (CGAP, 2015; World Bank, 2008a).
 Lack of capital, business operations, management knowledge and skills, high illiteracy for innovation &
growth in the financial service market (CGAP, 2015; Aurore de Crombrugghe, 2005).
 Limited market information, underdeveloped skills and capacity dev. services coupled with weak or
inefficient industry level coordination, limited efficiency and inclusiveness of retail payment systems (CGAP,
2015, 2014; World Bank, 2008a)
 In Uganda, the rules and norms influencing the SACCOs as a financial market system are subject to political
economy. Because of the complexity of the Co-operatives issues and the entrenched vested interests that may
be at play, a long term perspective for engagement is needed to build up the trust & the relationships to affect
change. As a result, the rules and norms have the following constraints:- restrictive, outdated & unresponsive
legal & regulatory framework, weak supervisory capacity, weak representation of consumer & industry voices
in policy making & regulatory processes, limited industry self-regulation, adverse political intervention by
government (CGAP, 2015).
These issues pose continued threats to SACCOs’ reliability, financial sustainability and growth which
undermine their potential impact which issues, the project is attempting to address.
d. How would your solution overcome them? Consider the country context, if your proposal involves a
specific country.
 Enlarged SACCO’s functions with increased diversified financial service provision & information systems.
 Provision of training, capacity building and TA (instead of injecting external funds for lending) to
members, board and management of the 1,000 SACCOs for improved management, governance,
accountability and performance.
 Availability of supporting policies, legal & regulatory framework, appropriate institutional support for
creation of conducive environment for the effective working of SACCOs. For example Co-operatives
Societies Bill 2014, Cap 112 and regulation 1992 for operating financial intermediation and risk
management for developing inclusive financial services with particular focus on community-based
financial institutions. This will improve on decision making process and performance as well as monitoring
& evaluation and business planning tools.
 Established networks so as to benefit from strong regional and local base to allow SACCOs fully integrated
in their environment and properly understand their working context. This will enable them know their

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members/clients well and generate a geographic & socio-cultural proximity that provide better way to adapt
the different financial products & services and technologies to the needs and characteristics of the users.
 Enhanced maintenance and improved operational and financial sustainability of 1,000 SACCOs and
support to financial inclusion. Being capable to provide good financial reports, understand financial and
operational indicators of their own sustainability, and manage income sources and operational performance,
such as human resources and supporting facilities (e.g., technology/system information).
 SACCOs should be able to manage and maintain:
o Their loan business (limited on loans, RLF); during the project there may be some new financial
products based on their members’ needs. Local economic activities such as: agricultural based
business, creative industries, and other rural based business which are nonfinancial business to be
integrated in SACCO’s activities.
o And improved client base by creating new delivery channels and entering new markets thus
increased membership.
Uganda’s SACCO sector is in development and consolidation phase. The supply of rural financial services is
growing and presents an important opportunity for the population that has hitherto been excluded from the
financial market system, so as to achieve 2030 SDGs agenda. However, constraints are threatening SACCOs’
reliability, financial sustainability & growth and undermining their potential impact, therefore need to be
addressed. Competitive trends are growing as a result of commercial banks’ diversification by down-scaling to
provide microfinance, and up-grading of NGOs taking up financial intermediation activities. SACCOs have
limited capacity to face these trends, but they are institutions which tend to favour endogenous development and
empower the V&L-IP in the communities to alleviate themselves out of poverty.
Further, they are member owned & controlled, and operated according to democratic rules and contribute to civic
education, participatory and democratic management of a territory or community. Therefore, SACCOs to promote
financial inclusion for inclusive growth approach need to be based on small SACCOs with a strong local basis of
proximity and active member participation built upon the adequate management skills and reap the benefits from
their comparative advantages, particularly in terms of geographic and social proximity in order to consolidate their
position on the financial market (Aurore de Crombrugghe, 2005).
Food for thought; whether the approach of ―Co-operatives of proximity‖ can guarantee a better service to the
most vulnerable populations especially in the rural areas.
Reference
1. Alliance for Financial Inclusion (AFI) Maya Declaration (2011). Global Policy Forum. Taking stock, setting goals,
moving forward; 28-30 September, Riviera Maya, Mexico.
2. Aurore de Crombrugghe (2005) The Savings and Credit Co-operatives in Peru and Ecuador and Development of
Rural Financial Services; SOS Fiam, Zoom Microfinance, Brussel–Belgium, December
3. Bank of Uganda, (2014). Status of Financial Inclusion in Uganda 1st Edition – March.
4. CGAP. 2014. ―Mobile Payments Infrastructure Access and Its Regulation.‖ Working Paper. Washington, D.C.:
CGAP.http://www.cgap.org/sites/default/files/Working-Paper-Mobile-Payments-Infrastructure-Access-and-Its-
Regulation-May-2014.pdf
5. CGAP. 2012. ―A Guide to Regulation and Supervision of Microfinance.‖ Consensus Guidelines. Washington, D.C.:
CGAP.http://www.cgap.org/sites/default/files/Consensus-Guideline-A-Guide-to-Regulation-and-Supervision-of-
Microfinance-Oct-2012_0.pdf
6. CGAP, (2005) Working with Savings & Credit Co-operatives; Helping to Improve Donor Effectiveness in
Microfinance, Donor Brief no. 25 August.
7. Co-operatives Societies Bill 2014, Cap, 112 and Regulation 1992 Uganda
8. Deena M. Burjorjee and Barbara Scola (2015). A Market Systems Approach to Financial Inclusion Guidelines for
Funders, CGAP, September.
9. Poyo Jeffrey, G. Westley and B. Branch, (2000) ―Regulation and Supervision of Credit Unions‖, Safe Money, IDB.
10. Office of the Commissioner for Co-operative Development (2015). Ministry of Industry, Trade and Co-operatives
Uganda.
11. Our SDGs Uganda, National Ownership, 2015.
12. World Bank. 2008a. ―Payment Systems Worldwide—A Snapshot.‖ Washington, D.C.: World Bank.