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Do not expect miracles from revival of Co-operative Bank - Economist
Minister of State for Cooperatives, Mr Frederick Ngobi Gume (right) and UCTU Chairperson, John Musila, inspect some of the trucks at Kawempe Division, Kampala. Photo/File
What you need to know:
- Mr Muhumuza said that co-operative unions and societies should be well-organised before attempting to revive the bank, as doing otherwise might lead to accusations against the bank for not providing them with loans.
Co-operative unions and societies have been cautioned not to set high expectations for the revival of the co-operative bank, considering the prevailing conditions in the banking sector of the country.
This advice comes at a time when co-operative unions and societies have been advocating for the revival of the cooperative bank since its dissolution by the government in 1999.
The bank, initially established in 1960 to serve the interests of co-operative unions and societies, has been given the green light by the cabinet for revival this year.
Dr Fred Muhumza, a lecturer in economics at Makerere University Business School, revealed this during a national cooperative consultative meeting with the theme "Co-operatives, Partners for Accelerated Development."
"Even if you revive the co-operative bank, it will not be significantly different from other banks operating in the country, and it may not necessarily improve services for you due to the way banks are regulated in the country," he said.
Dr Muhumza pointed out that the sector is subject to numerous rules, laws, and regulations, which at times limit the ability of banks to make independent decisions.
He questioned how co-operative unions and societies plan to secure the capital needed to revive the bank, asking whether they will seek external financing, wait for a government grant, or rely on members to mobilize funds for its revival.
He said that according to Bank of Uganda regulations, for a bank to be classified as tier one, it must have a minimum capital of Shs150 billion; otherwise, it would be downgraded to tier two or three.
Mr Muhumuza said that co-operative unions and societies should be well-organised before attempting to revive the bank, as doing otherwise might lead to accusations against the bank for not providing them with loans.
State Minister for Co-operatives, Mr Fredrick Ngobi Gume, acknowledged that while reviving the bank falls under the mandate of the Ministry of Trade, it would be prudent to involve cooperative unions in the revival process.
"The government sees you as co-operators, not as a government agency or parastatal where you revive your bank, manage your accounts, set your laws, and plan for it," he explained.
Mr Ivan Assimwe, the General Secretary of Uganda Co-operatives Alliance, assured that since it would be a cooperative bank meant for co-operators, they would be the ones determining the interest rates to charge.
"We shall also not allow members to present land as collateral. As long as you are a member of a cooperative union, that is your collateral to access finances and loans," he said.
