This is a continuation of my previous post on local brew saving groups. Last night I went with a British friend to the place. He enjoyed the millet-fermented local alcohol.
I was sitting beside the secretary of a saving group which was established two years ago. Some 20 young men sit in a circle and shared a bucket of malwa. When the brew lady comes with hot water, everyone tightens their straw and sips with some strength — they don’t want to miss the golden opportunity of letting alcohol go straight into their nerves.
After some drinking, the secretary started explaining how the group works. You pay 5000UGX to become a member. Then you fix your group and come sit with the same people every time. Every member is required to save at least 500 every day. You are free to skip days, but you need to make up for what you miss when you come here the next time. Group members can borrow as well. The amount you can borrow depends on how much you have saved. To take a loan, you need to find at least two witnesses who are members of the group. But no witness is needed for loans below 100,000UGX (40 USD). Loan interest is 1% per month, and repayment period is negotiable. If someone fails to repay, money will be deducted from the guarantors’ accounts. Therefore the group does not lose.
Savings from each member are returned at the end of the year. They also hold a meeting at the end of the year to discuss how to spend the profits they get from loans. usually they buy goats and alcohol to celebrate Christmas together. The secretary keeps a record meticulously, with the amount written down beside each member’s name on each day. At the end of a month, he calculates the balance and let members they what they have.
Where formal financial institutions fail to do their job of managing people’s money and providing affordable credit, people come up with innovative informal groups to solve the problem.