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Promoting micro-finance services for the youth

©IFAD/Susan Beccio

Successfully involving youth in agriculture can be a serious challenge, especially when young people living in remote rural areas are disempowered because of lack of assets and limited economic prospects. In Uganda, the Rural Financial Services Programme (RFSP), supported by the International Fund for Agricultural Development (IFAD) with a USD 18.3 million loan, has succeeded in attracting the youth to join the Savings and Credit Cooperative Organizations (SACCOs) it has helped promote. The goal of RFSP was to expand outreach of financial services mainly to rural communities that are involved in agricultural enterprises. 

"We started by targeting the whole community, however as we looked more into details who was joining, we realised that women and youth were very much involved, so we decided to encourage them further," explained Yusuf Giduno, Communications Officer at RFSP.

Since 2008 when the project was re-designed to focus on SACCOs, total membership in SACCOs increased by 45 percent from 249, 365 to 545, 687 in 2013. The latter figure includes 59, 813 groups with an average membership of 24 people each. RFSP has reached 9.6 million rural people with financial services through 735 SACCOs, of which 49% are women. From these SACCOs savings have been mobilized to the tune of 55.6 billion Uganda shillings (UGX-approximately US$ 22.7 m) up from UGX 11.2 billion in 2008, while the loan portfolio has reached UGX 96.1 billion (approximately USD 39.2m) up from UGX 17.4 billion.

Bukanga Agali Awamu SACCO office - Board chairperson, Wakabi George in front. His first ever account was in this SACCOBukanga Agali Awamu SACCO is located at Busalamu Trading Centre in Lukotaime village in the Bukanga sub-County. The SACCO was born out of a village burial group, which provided support to bereaved families and helped them organize and finance the burial of their loved ones. Initially the same group set up a cooperative which was later converted into a SACCO. "At one time I happened to attend a meeting organized by the Uganda Cooperative Alliance in Masaka.  

This is where I first heard about cooperatives and their benefits," explained George Wakabi, the SACCO's Chairperson. "On returning home, I shared this information with the burial group members and they agreed to pursue the idea. My first account was with this SACCO," Wakabi said. The cooperative and SACCO are now well-established institutions, which are owned, used and controlled by their individual members and groups. The SACCO was registered in May 2007, with 30 members, a share capital of UGX 600,000 Ugandan shillings (US$261), members' savings of UGX 73,000 (US$32) and a loan portfolio of UGX 965,000 (US$420).

The SACCO draws its members from the entire sub-county as well as neighbouring sub-counties, and its membership is growing fast. By the end of December 2013, the SACCO boasted 2,715 members including 766 women, 1796 men, 126 groups and 27 institutions. When members register in the SACCO, age is not part of the individual data captured, although data at SACCO level is disaggregated by sex. For RFSP, this has been an aspect they have learned – the importance of disaggregating data by age to know how many people from the various age categories are reached by SACCOs. 
 
Due to the high demand for SACCO services, the board decided to open up a branch at Bulanga Trading Centre.  

This office has been operational since September 2011.  Among its members are several young people.  The SACCO has been reaching out to youth, many were idlers at trading centers and hence unproductive. "Youth are getting interested in the SACCO.   We give them the option to form groups in order to benefit from the services of the SACCO," said Chairman Wakabi.
 
30 year-old Christopher Balichaza from Lukotaime village is one of the members who joined as a very young man. Balichaza became an orphan when he was nine years old after losing first his mother and then his father. He and his five siblings had a difficult childhood, under the care of their paternal grandmother.  He never managed to complete primary school.

He started farming - growing coffee and maize on a small-scale, and opened his first account with Ush300,000 (USD130) from the sale of his first crop. By 2012, his savings had reached Ush1.3million (USD565), which enabled him to take out a loan to buy a commuter motorbike to diversify his income. The SACCO offers loans at an attractive interest rate of 3 percent. Mortobike loans, commonly called ‘boda-boda' loans are mostly attractive to the male youths who have no land to engage in agricultural production, or feel that riding these bikes is more prestigious as a source of income. From the motorbike, Balichaza earns about UGX 15,000 (USD6.5) per day. He repays UGX 10,000 (USD4.3) to the SACCO for the loan and keeps the remainder for his daily expenses. He has a wife and three children, as well as the secondary school fees for his youngest brother. 

The Bukanga Agali Awamu SACCO is only one example of a successful micro-finance institution. Many more have been supported by the RFSP programme as testify the overall membership figures. "Our main vision is to expand the outreach of financial services to rural communities involved in agriculture," explained Giduno. "We do it through three main objectives: ensure access to financial services, promote usage of those services and make them sustainable."

The RFSP support is at three levels depending on the state of development of the SACCOs. For the newly established ones, the programme provides a money safe, a bicycle as well as office equipment. For the established ones, it provides a power generator and a motorbike among others and for SACCOs at a later stage of development, the programme helps them to branch out to other areas and reach more people with financial services. "The programme has done very well on its first two objectives. Our main challenge remains that of ensuring the sustainability of the SACCOs that we helped set up," concluded Giduno.