Savings and Credit Cooperative Societies (SACCOS) As a Source Of Financing Agriculture. Challenges and Lessons Learnt

Arthur Nuwagaba


There is growing urge by farmers to form Savings Credit and Cooperative Societies (SACCOs) in Uganda and Mbarara District is no exception. There are over 100 registered SACCOs (District Commercial officer- Mbarara District).  Majority of the members of these cooperative societies are farmers who have savings and in most cases do not have collateral to stake in commercial banks and other financial institutions to access Loans. The paper seeks to discuss the contribution of SACCOs as a source of financing agriculture, challenges faced by the SACCOs, lessons learnt and the way forward.

This is an empirical study that will be based on what is on ground. It will use some empirical data and will rely mostly on primary data other than secondary data.

Agriculture is a back bone of Uganda’s Economy. Almost 70% of Uganda’s exports are agro-based (The New Vision) and the agriculture sector employs 73.3% of the active labour force compared to services which employ 22.5% and industry only 4.2%.

There have been concerted efforts by government to improve agriculture and make the agriculture sector more attractive. The many strategies employed by government to make agriculture more attractive include, mechanization, improved seed distribution, farmers education and provision of soft loans. In a bid to finance agriculture, the government of Uganda has encouraged and promoted cooperative societies as an engine to accelerate the accessibility of loans from these cooperative societies which in this case are SACCOs. The aim of promoting these SACCOs is because in developing countries like Uganda, there are low levels of saving culture owing to poor underdeveloped stock markets, dominance of urban based commercial banks, Micro Deposit Taking Institutions (MDIs) and non regulated Micro finance institutions in the financial markets as vehicles for savings. Hence Savings and Credit Cooperatives (SACCOs) are intended to offer an alternative to improve the above un- desirable situation in low income countries especially helping members who in most cases are farmers.

Savings and Credit Co-operatives (SACCOs) are community membership-based financial institutions that are formed and owned by their members in promotion of their economic interests. These institutions mobilize and intermediate savings exclusively with in their membership under the co-operative statute 1991. Furthermore, they are one of the several types of cooperatives that are unique micro finance institutions categorized under tier four in the financial market and therefore not regulated by Bank of Uganda.

Therefore, Savings and Credit Co-Operatives (SACCOs), one of the several types of co-operatives are unique, legal, member-based Micro-Finance Institutions (MFIs) and unlike many other Micro-Finance Institutions, SACCO owners are also the users of the service that the SACCOs offer.

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ISSN (Paper)2224-3216 ISSN (Online)2225-0948

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