June 2007: Rural Bank and Microfinance Successes in Uganda's Epicenters

Mbarara  Epicenter Loan Group with its IGA.jpg

From May 27 to June 1, I was in Uganda monitoring the microfinance program. I had the opportunity to visit the epicenters where the African Woman Food Farmer Initiative (AWFFI) microfinance program for women and the Strategic Planning in Action (SPIA) microfinance program for men are active.

During the course of the week, I visited all three of the government-recognized banks at Wakiso, Mpigi, and Kiboga epicenters. These three banks are all performing well and are at different stages of development.

The youngest bank is at Kiboga epicenter. This bank received official government recognition and was inaugurated in January 2007. To date, the bank has 358 members (307 women and 51 men) and has disbursed loans to 207 women in 23 groups and 46 men in 5 groups. Savings at the end of the first quarter 2007 stood at 24,047,150 Ugandan Shillings ($13,741), and shares stand at 3,745,000 Shillings (~$2,140). The partners at the epicenter continue are ecstatic to have their own bank, and while the Board of Directors has only a few months experience, I found them to be extremely competent in performing their duties. The minutes book which is maintained by the Board’s secretary is a case in point. It was the best maintained minutes book that I had seen thus far across all of our government-recognized rural banks. Photo: Kiboga epicenter rural bank Board of Directors.

Mpigi epicenter is the second oldest recognized bank in Uganda. Formal recognition was obtained in January 2006, and the bank began with 119 members. Today there are 404 members, and members’ savings total 25,777,703 Shillings (~$14,730). Last year, I was in Mpigi for the inauguration of the bank, and I met with the Board of Directors. One year later, I found the Board to be much more articulate in explaining their duties and their vision for the bank. I was especially impressed by the bank manager whose recordkeeping was meticulous. The bank’s repayment rate has been 86%, which is relatively low. This problem is the focus of the Board’s attention, and they have launched a strategy to obtain 100% recovery by August. The strategy includes entering into new agreements with members whose loans are more than three months past due and then seizing the members’ collateral in case of non-compliance. The Board will also set up village loan committees in July to monitor and ensure recovery of late loans. In addition to improving the quality of the loan portfolio, the Board would like to increase bank membership to 800 members by the end of 2007. This will be possible because the new village loan committees will be sensitizing the community on the advantages of membership and because the Board will be sensitizing people in neighboring parishes that are not part of the epicenter to also join.

Wakiso epicenter is home to the first government-recognized Hunger Project bank in Uganda. In July, the bank will be three years old. The bank currently has 880 members and hopes to reach 1,000 by the end of the year. During my last visit on year ago, membership was at 625. Cumulative loan repayment currently stands at 95%, and member’s savings total 53,588,677 Shillings ($30,622). The bank is indeed growing and has become a model for the whole Hunger Project-Africa microfinance program. The bank is financially self-reliant. Each year the bank’s income increases, and it is able to cover its own costs without support from The Hunger Project. The bank has even been able to recruit a cashier to assist the bank manager and to increase the salary of the bank manager. This year’s plans include installing electricity at the bank and computerizing the information system. Future plans are to open another branch and to purchase a mode of transportation.

What is especially exciting about Wakiso rural bank is that it is developing new financial products. Wakiso rural bank now offers its members various types of savings, loan, and insurance products. It is our first rural bank to offer youth savings accounts, and it is now offering individual loans. Education and emergency loans are also in development. This diversification of financial products comes from the suggestions of members themselves and ensures that the bank is really meeting the needs of its members, who are also its owners. Wakiso rural bank is indeed a pioneer among the The Hunger Project rural banks and exemplifies the exponential potential of microfinance in rural Africa.

After meeting with the Wakiso Board of Directors and discussing their plans for the future, I had the opportunity to visit the home of the Board President. Her household was definitely free from hunger and poverty. She is engaged in a plethora of income-generating activities: cattle-raising, poultry-raising, goat-raising, maize cultivation, and mushroom farming. It was quite impressive to compare her old house and her newer house, which are both found in the same compound. She was able to construct the new home with profits from her first loans through the AWFFI program.

In addition to the rural banks, I also visited three epicenters that are in the Direct Credit phase of the microfinance program.

In Mbarara epicenter in western Uganda, loan disbursement just began in the fourth quarter of 2006, and the first monthly repayment date was in February. From February to May, the monthly repayment rate has been 106-107%, a quite strong start to the program. Our community meeting in Mbarara was very well-attended. The partners are already talking about their future bank, and I stressed that their performance in Direct Credit would determine how quickly they would be able to have a bank and how much funding their bank would have. At Mbarara I also had the opportunity to visit group and individual income-generating projects, which included pineapple farming and pig, goat, and poultry-raising. Photo: Igana epicenter meeting.

At Iganga epicenter in eastern Uganda, the repayment rate for both men’s and women’s loan groups after three cycles of Direct Credit is 96%. Rural bank mobilization is underway with 64 persons having already purchased shares. I held a meeting with the partners to congratulate them on their performance during Direct Credit and to encourage them in establishing a successful rural bank. The District Cooperative Officer was also present at the meeting and conducted a sensitization explaining how people could become members of the bank and how the bank would function. The Hunger Project-Uganda anticipates that formal recognition and inauguration of the rural bank at Iganga will take place in early 2008.

I also visited Kiringente epicenter. Although this epicenter is older than Iganga, the partners have not demonstrated the same commitment and dynamism as their counterparts in Iganga. At our meeting, we discussed some of the problems which are slowing down the program and preventing the creation of a rural bank. Community leaders committed themselves to reviving the program. Since my departure, the AWFFI Project Officer reports that the leaders have followed through on their verbal commitments. Attendance at community meetings has improved, and a loan recovery campaign is underway. Photo: Kiringente loan committee chair signing the check for loan disbursement.