Cooperative model policy as a development tool for the informal sector

What about market women in Nakasero Kampala, the welders of Katwe, or the cassava growers of Bukedea?

What happens to these people when the time comes and they are no longer able to go to their workplace to execute their trade? What happens when the rural farmer falls sick and is unable to go out to cultivate? The answer is that they will most likely be reduced to a life of beggars, paupers, and in the worst case scenario they die.

The answer would be different if these market women in Owino had a cooperative called “Owino Market Women Association” with a compulsory savings scheme that charges 10 percent of each vendor’s earnings every month and injects it into a fund. That means that in case of permanent injury or old age, there is social support for the “bazilwanako”.

This would imply that the no longer active vendor would not actually become a burden to her family and relatives or a street beggar. It would imply that one would easily rise after a strong fall.

The government has more cause to worry, than me, about the ever expanding informal sector. In the absence of automatic retirement or unemployment allowance, and in the absence of universal medical insurance, what will happen to these people employed in the informal sector when they are no longer able to work? This is a major cause for worry for a country with high unemployment rates and thrives on the informal sector.

Of course the cooperative model would not only cater for social security. If there were a properly functioning “Bukedea Cassava Growers Association” with a compulsory savings scheme, even the problem of access to capital for expansion would have been solved yesterday. I am trying to leave out the fact that cooperatives would make a united front for better negotiation of deals, price stability, and joint market exploration. When applied to agriculture, we could have a real agricultural revolution. Benefits have already been witnessed in tea and coffee though these existing cooperatives have not exploited their potential. From price stability, to establishment of storage infrastructure, to research on the best breeds, to pest prevention and mitigation of climate change effects, what wouldn’t a strong cooperative do?

And yes, cooperatives are the quickest way to mobilise money through crowd funding- an alternative that has not been exploited in Uganda yet it could form an alternative to the hostile interest rates imposed on bank loans.

However, these cooperatives and associations need to be guided in their operations. A couple of weeks ago, I was in my home district Mitooma when I was approached by a leader of a boda boda savings association for advice on their operations. I was shocked to learn that the association gives loans to its members, from their own savings, at 5 percent per month. Why would an association charge all that money on its members? When will the members really develop if they cannot access cheap loans for capital? I therefore think we (the elites, and perhaps the government) have a heavy duty to do if society is to benefit from this kind of development policy.

The “cooperative model” would be a better policy for government to take if it wants to see a transformation of the informal sector players and join the middle income status.

Prosper Ahabwe Julian, Lawyer and an economic analyst.