Witten by Joshua Kato- CPA- ACCA – CTA – DITRA – BIDA – ADIT
Chartered Accountant and Tax Advisor
When was the moment you discovered the wisdom in investing and decided that Investment Clubs were worth paying attention to as your gateway to financial freedom?
The Ugandan government has set a bold vision to transform Uganda into an upper-middle-income country by 2040. Achieving this ambitious goal requires addressing the problem of unemployment and increasing the capacity for self-employment. Uganda’s entrepreneurial spirit is well-documented, having earned the top spot as the most entrepreneurial country in the world in 2003 and 2015. However, over 41.1% of MSMEs in the country fail within the first two years, and for every three Ugandans that escape poverty, two fall back in. It is imperative that Ugandans position themselves to succeed in business, and one effective way is by leveraging the power of Investment Clubs and SACCOs.
Being involved in several legitimate savings groups and investment clubs has shown me the incredible power of unity. The advantages of being part of a larger resource pool are immeasurable. The effortless rapport-building, free knowledge, and advice—which would be costly to obtain on your own—make these groups invaluable. SACCOs and investment clubs are the new normal, steadily helping us eliminate poverty while achieving financial and social goals.
A SACCO, or Savings and Credit Cooperative Organization, is a member-owned, governed, and managed cooperative where individuals save money together and offer loans to each other at reasonable interest rates. Membership is open to all who belong to the group, regardless of race, religion, color, creed, gender, or job status. SACCOs are unique, democratic, member-driven, and self-help organizations regulated by the Ministry of Trade, Industry, and Cooperatives for registration purposes, as well as the Uganda Microfinance Regulatory Authority (UMRA) for licensing. The Bank of Uganda is gearing up to take over the licensing of SACCOs with significant savings and institutional capital.
The Ugandan government has introduced several models to help societies create wealth and move out of poverty, such as the Parish Development Model and Emyooga. The Parish Development Model focuses on organizing and delivering public and private sector interventions for wealth creation and employment generation at the parish level. Emyooga, launched in August 2019, targets transforming 68% of homesteads from subsistence to market-oriented production, promoting job creation and improving household incomes. These initiatives benefit organized groups of people in SACCOs or investment club setups, especially during economic shocks like the COVID-19 pandemic.
Joining a SACCO is beneficial in various ways. These among others include; –
Shares and Savings – Every potential member must purchase a minimum share, making each member an owner of the cooperative. Monthly contributions are usually split between various savings accounts, and savings can be withdrawn on demand. SACCOs determine the minimum savings per member among their members.
Lower Interest Rates – SACCOs typically offer lower interest rates on loans compared to commercial banks. Members set interest rates depending on community circumstances, making them more flexible and affordable.
Loans and Credit – Members are encouraged to save toward loans, which are ratio-based on savings and shares. Loans can be for productive, income-generating activities or provident purposes like school fees, funerals, and weddings. SACCOs also offer quick or emergency loans to meet unforeseen circumstances.
Financial Education – SACCOs educate their members on financial matters, teaching prudent handling of money, budgeting, and keeping track of finances. This education helps young people master the art of saving and investing, setting them up for financial success.
Community and Networking – SACCOs create a sense of community and networking opportunities among like-minded individuals. Members can build relationships, share ideas, and support each other’s business endeavors. Being part of a SACCO also offers leadership opportunities, as members can be elected to the Board of Directors or as delegates.
Dividends and Profit Sharing – Members earn dividends on their shares and interest on deposits, making them both shareholders and owners of the SACCO. This profit-sharing model contrasts with commercial banks, where customers do not benefit from the profits generated from their savings.
Much as there are so many benefits of these SACCOs, their management must be well aligned to help in avoiding Fraud. While SACCOs offer many benefits, there are risks, including fraud. Young people must do due diligence to ensure they join legitimate SACCOs. Look for SACCOs licensed and regulated by the appropriate authorities to avoid falling victim to fraudsters.
There is a great need of embracing Digital Transformation – SACCOs must innovate and embrace digital transformation to remain relevant. Digital platforms offer safer and more efficient ways to manage finances, with cloud-based systems providing secure information storage and easier compliance. User-friendly digital banking experiences attract the tech-oriented younger generation, enhancing their participation and satisfaction.
Joining a SACCO is a smart decision for young adults looking to secure their financial future. SACCOs offer numerous benefits, including higher interest rates on savings, lower loan interest rates, financial education, and a sense of community. By becoming a member, young adults can build their savings, access affordable loans, and network with like-minded individuals. SACCOs also provide leadership opportunities and profit-sharing models that empower members financially.
As Uganda aims to become an upper-middle-income country by 2040, SACCOs play a crucial role in achieving this goal by fostering entrepreneurship and financial inclusion. Young people must seize the opportunity to join SACCOs, start saving, and contribute to the economic development of their communities. With government support and digital transformation, SACCOs are well-positioned to help the youth build wealth, create jobs, and ultimately eliminate poverty.