Savings and Credit Schemes in East and Southern Africa

The Agency for Cooperation and Research in Development(ACORD)carries out a rual developemnt promotion programme in South Western Uganda named Oruchinga Valley Rural Credit Society (OVRCS).

The aim of the credit scheme is to rpovide supplementary credit to rural producer groups at reasonable interest rates without collateral.

It also aims to serve as a stepping stone for target groups to become eligible for institutional credit by organising and operating their own credit programme and by this, to help strengthen internal organisational and financial capabilities of the target groups.

The credit scheme operates a loan disbursement mwethod where groups of the target population initially operate a separate fund within each group. Therefore, primarily, a credit scheme is implemented within the group of prospective loanees. Funds for the scheme are accumulated by the group itself through membership fees, member deposits, group wage work(where the entire group does wage labour and deposit the money earned with the scheme)and the profits of group productive and commercial activities.

Once the group operates a successful credit scheme within the group, without outside help, it can apply for credit from the OVRCS.

Each group operates its own credit fund on its own conditions. Interest rates range from 5% to 25% per month. The average being 18% per month. This extraordinarily high monthly interest rates have been set by the groups themselves, desiring to increase their group funds rapidly in order to invest in high income generating projects. These interest rates also reflect the high rates of inflation in Uganda in 1992.

All group members participate in deciding loan conditions, loan amounts, interest rates and repayment schedules and the loan conditions vary from loan to loan. Due to the collective decisions on loan conditions, the loan recovery rate is very high.

Once the individual credit programmes of each group are established, every group is assisted by OVRCS to link the group with external technical assistance and to formally institutionalise the group’s credit programme.