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Keep off cooperatives! Ministers warn BoU and finance ministry

State Minister in Charge Cooperatives Frederick Ngobi Gume. File Photo

Kampala, Uganda | THE INDEPENDENT | The new leadership at the Ministry of Trade, Industry and Cooperatives want the Ministry of Finance, Planning and Economic Development, and the Bank of Uganda, to stay away from the management issues of the cooperative sector.

The State Minister in Charge Cooperatives, Frederick Ngobi Gume says there has been a lot of confusion in the sector caused by the clashing of regulatory mandates of the three institutions, which has seen cooperatives projects either failed or delayed.

The cooperative movement collapsed in the 1990’s largely due to mismanagement, but also political interference, which the current management vows to avoid.

Currently, Minister Gume says that even the laws that govern Savings and Credit Cooperatives (SACCOs) are not clear, allowing other government agencies to lay claim on their management.

He says that for this, some wealth creation programs like Emyooga have faced many issues.

For example, under the program which is implemented by the Microfinance Support Centre, beneficiaries apply for the cash from the MSC, which deposits the money on to their bank accounts.

The beneficiaries then have to apply for a certificate from the Ministry of Trade, Industry and Cooperatives to be able to access the money at the bank. Some cooperatives, by the nature of their operations like lending are answerable to the BoU.

Gume says that under such circumstances, it is not expected that the sector can run smoothly.

The Minister for Trade, Industry and Cooperatives, Francis Ndebesa warned that the other agencies should stay away from the running of cooperatives because they also have their own mandates.

He proposed among others, that creation of a cooperative bank must be fast-tracked as this will go a long way in streamlining management especially if it is able to raise money from the members themselves.

The Cooperative bank that had been formed in 1964, was closed by the Bank of Uganda in 1999, on grounds of inadequate capitalization and high indebtedness.

In June 2016, Amelia Kyambadde, the then minister disclosed that cabinet had approved the establishment of Uganda Cooperative Bank, with the ministry tasked with coordinating enterprise-based cooperative movements to merge into the bank.

But the minister says a bank is not the only solution. Other challenges to the development of the sector include the cooperative colleges, which the ministry wants transferred from Education, what cooperative studies should be integrated into the national curriculum, according to Gume.

One of the challenges remains financing, with the allocations for cooperatives amounting to Ugx 28 billion, which the ministry says is too little for them to cover the whole country promoting and monitoring stakeholders.

According to records at the Cooperatives department, there are currently more than 27,000 cooperative societies, up from 6,000 10 years ago.

The cooperative movement that started as a protest against Asian domination of the produce trade business in 1913, was legalized in the mid of the century and legislated for in 1963.

In 1970, the 1970 Cooperative Societies Act was put in place and took away the autonomy character of the cooperative movement, for the government to take full control.

This is blamed for having led to the collapse, as members lost control of their cooperatives to managers, politicians and government officers.

In 1991, the National Resistance Council, NRC, enacted the Cooperative Societies Statute, that was later transformed into an Act Cap 112 in the laws of Uganda.

The ministry says the cooperative organisations themselves need to operate under proper management regime if they are to be sustainable even when economic situations change.

The main causes of the collapse of especially SACCOs include poor leadership and governance, inadequate capitalization, lack of trust among members, lack of access to reliable markets and as well as adequate storage, post-harvest handling and agro processing infrastructure.

Others are massive frauds by management staff and committees, high level of dishonesty, lack member knowledge in cooperative issues, political interference from local politicians, as well as different interests like borrowing without saving.



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