Effects of Microfinance Institutions on Communities in Uganda

Jacob Waiswa
Peace and Conflict Programme, Makerere University

Despite too much faith that was placed in micro-finance projects in early and mid 2000s by mainly citizens working in the informal sector, it was not long when the managements disappeared with client's money. 

As a result, the once faithful clients fell victims to what later turned out to be the deceitful yet so persuasive campaigns of micro-finance institutions -showing how how in every way they would help solve the business challenges of small business owners. 

The usually reliable Bank of Uganda was very slow at protecting micro-finance clients until around 2009/10 after many crooks had taken advantage of struggling Ugandans and made themselves rich. In fact the trend only popularized the traditional bank institutions as many ran to them to find safe hands for their monies.

Besides, micro-finance institutions work for the haves, however small. The very poor will always have or feel nothing to do with micro-finance institutions. 

During the savings sensitization and recruitment, I remember some of the people who afforded to listen to me telling me they had nothing to keep with the micro-finance, instead asked for money assistance without having to save to the institution while others did not find the idea of interest good at all. They felt if it was in the best interest of them, then there was no need of asking them extra money to pay back along with. They looked at it as extortion, which reminded them of earlier con-men and women under the guise of micro-finance companies. 

 Management inefficiency was highly characteristic of them; if they had the project manager as professional, the other lots were entirely not, neither training nor experience were looked at recruitment. Instead, they had the culture of bringing in family members and friends to work in the companies. Neither the board nor the members ever communicated along, or even held assemblies to create management committees and board members annually, or after a given period of time.

Even the first and last members of the board did not have expertise, not even experience to do with micro-finance projects and development. The criteria of receiving a loan, which every business person yearned for was so stringent that soon they found it irrelevant to keep their money with the companies. 

After failing to secure loans, it was very common to clients to withdraw all their savings and quit. It was asserted that the client had to have a certain percentage in order to get a given percentage loan. If he or she had saving of say 250,000, he or she could borrow 500,000/-. Some times for some reasons even if the client reach the said proportion of money in saving, never would they grant him the loan. Because of the incoherence that existed between the board and management, decisions to grant loans were either delayed or never given at ll -to the disappointment and anguish of the clients. 

Uganda is known to have attractive regulatory frameworks and policies, but also known for non-implementation or poor implementing them. 

Unless that is achieved, and an excellent reputation created, and people be convinced of that reputations, micro-finance institutions will have a rough ride in the country. 

You can also read: http://ezinearticles.com/?Microfinance-Service-Development-in-Uganda&id=5024105