Banking at a credit union in Uganda

Working at a credit union is fun. Having only four officers and a manager means intensive interaction between collegues and close contacts with our members. In the past two days, I spent much of my time standing behind the counter following bank officers through their working procedures. Banking at this credit union turns out to be much simpler than at a big commercial bank in the US.

Global Microfinance System developed by the IMF is used to store information of all members and to keep track of their account activities (including loans). Although the bank has electronic records for each member, members do not have online banking services or electronic monthly statements — computers are very rarely seen here. Instead, each member has a yellow “passbook” which they are supposed to bring at each transaction. When they come to the bank, bank officers will write down the details of the transaction and the remaining balance in the account. If a member comes to the bank without his yellow book, bank officers will give him a receipt specifying details of the transaction and current balance.
The SACCO offers agricultural, business, developmental, school fees, and boda boda loans. A grace period of two months (during which only interests are collected) is given to agricultural loans. The principal is equally divided throughout the total months of repayment. When the due date comes, the bank officer will deduct the amount due from the member’s savings account. More details about the loans remain to be learned.

The saving services offered by the SACCO are relatively straightforward. But I was confused about the fact of them not paying any interest on savings accounts (counterpart of checking accounts). Today a member provided me with an answer: members deposit and withdraw money too often for the bank to calculate interests! This is especially true for boda boda drivers who come here daily to deposit money and then withdraw a lump-sum at weekends. These high-frequency petty transactions increase the administrative costs of the bank whithout providing a secure source that the bank can use for loans or investment. A monthly ledger fee of 500 Uganda Shillings ($0.2 US) may be well justified to compensate the bank.

By the way, I am learning Luganda in an informal class with several American students. I can greet others and introduce myself, but I hope to know more about the vocabulary and sentence structure of this language in the weeks to come. To facilitate better communication with Ugandans, I have also got myself a Luganda name — Wanyana — which means a type of grasshopper!

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