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Microfinance accounts grow to 4.7m
The increase in accounts under microfinance institutions indicates a growing savings culture. Photo / File
What you need to know:
- Data indicates that of the 4.7m saving accounts, just half, or 2.05m have borrowed or are still servicing loans
Savers under the Association of Microfinance Institutions in Uganda have grown to 4.7m accounts, reflecting growth in the savings culture and utilisation of formal financial services among low-income Ugandans.
Data further indicates that of the 4.7m saving accounts, just half, or 2.05m have borrowed or are still servicing loans with more than Shs3.8 trillion worth of loan capital deployed, while members operate a combined network of 702 branches in 102 districts.
Outside microfinance, data further indicates that the saving culture has enjoyed good growth in the last five years with members under savings and credit cooperative societies (Saccos), almost tripling from 5 percent to 14 percent, according to the 2023 Finscope survey.
However, the growth is lower compared to about 17 million accounts held by supervised financial institutions, including commercial banks and credit institutions.
Speaking during the second annual Microfinance and Savings Groups Conference in Kampala Secretary to the Treasury Ramathan Ggoobi, said that whereas the savings sector has grown over the years, the growth would have been much higher but many potential savers “are held back by a lack of interest, knowledge, and trust,” due to theft, fraud and abusive practices by microfinance service providers.
Mr Ggoobi also blamed borrowers for some of the challenges in the microfinance sector, noting that many would-be borrowers lack collateral, use forged documents such as land titles and lack adequate information, which makes lenders wary and reluctant to extend credit to such borrowers.
Mr James Onyutta, the president of the Association of Microfinance Institutions in Uganda and managing director of Finca, said despite the progress made in the microfinance sector, financial exclusion remains a challenge and a barrier to economic growth.
Based on the 2023 Finscope survey, he said, only 64 percent of Ugandans are included in the formal financial sector, which calls for more efforts to create a cohesive and inclusive ecosystem.
The Finscope survey indicates that more Ugandans are saving formally and informally compared to 2018, with the percentage of savers increasing by 6 percent from 54 percent to 60 percent.
However, the report indicates that most Ugandans still save to cover living expenses but are also increasingly shifting towards saving for productive investments such as real estate development, business, and agriculture.
The report also indicates that Saccos and mobile money are the highest avenues through which people save, while at the same time, the proportion of Ugandans keeping money at home has more than doubled which could be a sign of lack of confidence in financial service providers.
