Officials from Uganda Cooperative Alliance Limited appearing before Parliament’s Finance Committee
Managers of the Savings and Credit Cooperative Societies (SACCOs) have rejected the proposed increment of the share capital requirement fronted by Bank of Uganda for Microfinance Deposit Taking Institutions (MDIs) from 25,000 currency points (Shs500M) to 500,000 currency points (Shs10bn), warning that the move if implemented would lead to the collapse of many SACCOs.
The warning was issued by Ivan Asiimwe, the General Secretary Uganda Cooperative Alliance Limited, while appearing before Parliament’s Finance Committee to give views on the Micro-Finance Deposit-taking Institutions (Revision of Minimum Capital Requirement Instrument, 2022), where Government is seeking to increase share capital requirements of financial institutions under the tier three group.
He said that the establishment of SACCOs is manily to uplift the savers’ standards of living and not necessarily make profits, but subjecting them to the conditions of Bank of Uganda that are focused on profits and not members’ satisfaction would likely lockout these SACCOs.
“Automatically, when you say you want to increase from Shs500M to Shs10Bn, that is almost 1900% increment which is ideally would be illogical, I wouldn’t buy that idea; it is too much. Much as the amendment was last done in 2003, but you also have to consider the economy of this country. How many of Uganda owned organisations qualify, what are you trying to promote? Are we promoting indigenous or the foreign? It is something we need to deeply look through, otherwise, we may lose the potential ones,” said Asiimwe.
Although SACCOs fall under the lower category of tier 4, Asiimwe expressed fears that the regulations might affect their category because already, some SACCOs with capital of above Shs500M are being required to come under the armpit of the Central Bank for supervision, wondering if such SACCOs will also be required to increase their share capital to Shs10Bn as proposed by the Central Bank.
“Assuming SACCOs have already started and all of a sudden you increase the share capital to Shs10Bn, what is going to happen? Are you going to suspend these SACCOs, are you going to liquidate them? What are you going to do? Now, if in the event you are going to liquidate them, how about the Cooperative Society’s Act, which says that the liquidation must be done by the Registrar of Cooperatives? There is already confusion, there is already legal dilemma. Let us not create a dilemma within a dilemma. We pray that Parliament saves the SACCOs, if you don’t save them, we are going to bury them, and then have another day to resurrect them,” Asiimwe noted.
However, Emely Kugonza (Buyanja East) said that the new regulations will only apply to SACCOs that may seek to shift from Tier 4 to tier 3 and join the MDIs noting, “Because at this particular point, it would mean that you are changing the legal status, because as a Cooperative, at that point you wouldn’t be a SACCO, but you would be recognized as MDI. But should you choose to operate as MDI, this doesn’t affect you because you aren’t being forced to move from that level to another level.”
