Loans can’t bail out our rural poor

In light of the failure of multiple ‘well meaning’ programmes of Government of Uganda and of so-called Civil Society Organisations to achieve their overstated targeted to “eradicate poverty” through the provision of loans to the poor, it is opportune to re-publish the views that I expressed in an interview that was published in The New Vision of Thursday, June 24, 2004.

Put in context of programmes such as Entandikwa and all its subsequent variations such as the SACCOS craze inclusive, the views that I expressed in my interview in 2004 remain absolutely relevant.

At the time that I gave the interview I was the head of the Secretariat of a not-for-profit organisations as its Executive Secretary. I was interviewed by Harriette Onyalla who wrote the photo story which was published in The New Vision as follows:

Uganda Change Agent Association (UCAA) has been empowering rural folks for the past 12 years. Harriette Onyalla talked to UCAA’s executive secretary Norah Owaraga. Below are the excerpts.

Question (Q): Why do you emphasise training instead of financial assistance?

Answer (A): We are addressing why they lack capital. Our product is a countrywide training and capacity building programme in business skills and management. We have found that rural folk have the resources they need to start a business or improve their incomes.

Q: What about micro-finance institutions?

A: Micro-finance institutions give loans to those who lack funds. Loans are not bad but should be given in context. Many MFIs hurry to give out loans and lack enough time to prepare people to use the loans. The clients end up thinking they are given donations.

Q: Is that a big problem?

A: Very big and it’s everywhere in this country. Busoga is the worst hit, with too many MFIs targeting women. They get these loans and invest in things like saucepans, gomesi, or buying Christmas clothes for the children. These are not income generating ventures yet the loans have to be paid back with interest. In the end, people borrow from one MFI to pay another. They end up being indebted to over five institutions. They are becoming poorer because the loan recovery programmes will come and take the few live stock they had before they got the loans.

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