MSC History

MSC History

by MSC
National Policy on Rural Financial Services

In the last 20 years, GoU has initiated, implemented and supported various microcredit schemes aimed at fighting poverty in the country with a focus on creating revolving funds for micro credit to households at the grass roots. Such interventions included; the Rural Farmers Scheme, the South Western Small holder Rehabilitation Project, the Entandikwa Credit Scheme, the European Union (EU)/GoU Micro Credit Programme, the Youth Entrepreneur Scheme, the Poverty Alleviation Project (PAP, 1994-1998) and former SUFFICE among others. Some of these efforts have had little success and limited impact on addressing the needs of the target population due to design flaws and management inadequacies.

The GOU developed the Rural Development Strategy (RDS) as a means of enhancing the deepening of micro and rural financing using the sub-county as a planning and monitoring unit. The RDS is focused on; supporting formation of SACCOs in sub counties where they do not exist, strengthening of existing SACCOs, instituting effective SACCO supervision and regulation and enhancing access to whole sale funds for on lending to active and productive entities. The RDS supports the Prosperity For All (PFA) program, which emphasizes the need to enhance production, competitiveness and commercialization of the economy. The PFA is to be achieved through increased production and productivity, promoting value addition and marketing, improved access to information and increased access to affordable financial services.

Prosperity for All Program

Under the PFA program, GoU promulgated an economic vision which envisaged every household in Uganda to have the means to earn the minimum income that enables it to access basic human needs such as food, shelter, clothing, health and education. In this vision, every adult household member is expected to be employed and all household members are expected to access essential social services. The PFA has four main components. These are:

  • Production and productivity
  • Value addition and marketing
  • Community information system
  • Rural Financial services

In the implementation of PFA, the GoU developed a strategy for RFS aimed at developing a financial infrastructure that can reach every sub county in Uganda. The objectives of RFS were to:

  • Create and build a nation-wide network of rural financial infrastructure to deliver microfinance services
  • Assist in the establishment of a viable and properly managed Savings and Credit Cooperatives Organizations (SACCOs) at every sub-county
  • Ensure adequate regulation and supervision of these rural finance institutions so as to safeguard members’ deposits
  • Ensure that the population has access to financial services at affordable interest rates
  • Ensure that all households in the country can have a savings account
  • Avoid duplication of effort among GoU implemented programmes.

In the implementation of RFS, GoU was to support the development of SACCO infrastructure at the sub-county level. The institutional arrangement for delivery of RFS defined the proposed roles of the various key programs and institutions as follows:

  • GoU through the MFPED was responsible for the formulation and oversight of the policy and strategic framework. It was also responsible for monitoring the implementation of the policy by the various agencies covering aspects such as resource mobilization, outreach, and delivery of RFS;
  • Post Bank Uganda was to carry out the function of linkage banking, thus acting as a transaction bank. It may where possible, provide back office support to SACCOs;
  • Uganda Cooperative Savings and Credit Union Limited (UCSCU) was responsible for mobilizing communities to form new SACCOs, provide capacity building to SACCOs, build and strengthen their capacity, and supervise their performance. It was also responsible for developing and maintaining a data base on SACCOs.
  • The Microfinance Support Centre (MSC) Ltd was responsible for the provision of wholesale credit and business development services.
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