MICROCAPITAL STORY: Uganda Cooperative Alliance and Disgruntled Members Fight Over Funds

The Uganda Cooperative Alliance (UCA) has entered a dispute with members who claim that only collectives of individual cooperatives can join the UCA. The disgruntled member collective societies claim that the UCA is accepting and favoring newer individual cooperatives rather than manage the existing collectives. The collective societies have submitted a business plan to the government to claim the USD 16 million allotted to the UCA for building the infrastructure of cooperative societies. A representative of the collectives and chairman of the Uganda National and District Unions Association, Erisa Ngereza, comments, “We want this money as a loan, while Uganda Cooperative Alliance wants it as a grant.” The UCA has criticized the ineffectiveness and corruption of the older collectives, seemingly preferring to move forward with fresher projects. The State Minister for Micro Finance, Caleb Akandwanaho, advised both parties, “If you do not end the wrangles, no financier nor government would give you money. We need to see willingness in organizing yourselves more than when you are presenting proposals and demands.” The UCA, founded in 1961, works with many types of cooperatives in areas of agriculture, manufacturing, and microfinance through Savings and Credit Cooperative Societies (SACCOs).

The by-laws of the UCA, updated in 2005, state that any registered cooperative society may become a member. However, this contradicts the Cooperative Societies Statute of 1991, which authorizes the UCA to advise the government on policies for cooperatives and established the UCA’s Board of Directors. The UCA is also the body that is meant to resolve disputes amongst registered societies. Individual cooperatives must have a minimum membership of 30 individuals whereas collectives must include at least 2 indiviual cooperatives. Apex bodies must consist of two or more collectives. The Statute names the UCA as the apex body for all cooperatives in the country.

The government has been orchestrating a revival of cooperatives in Uganda, primarily to bolster the agriculture industry by allowing farmers to pool products to sell in bulk. In the budget for this financial year, the Ugandan government has allotted USD 16 million for cooperative societies and USD 1 million for market research. Before cooperatives, middlemen could cheat farmers to take a large share of profits. Cooperatives emerged in the 1930s, but in the 1990s, the World Bank encouraged the disbanding of cooperatives in favor of farmers selling their own products in the free market. However, this was not successful due to price fluctuations in the market and the fact that farmers were not able to sell a small volume of products to bulk buyers. The UCA was created to act as a government agent in logistically supporting cooperatives and undertaking capacity building for societies. The UCA is not a regulatory body.

The conflict between the UCA and the collectives stretches back several months. In January, the UCA submitted a concept note entitled “Empowering farmers through an integrated marketing system” to the Microfinance Support Center, a government owned company that handles rural microfinance. The note states that the UCA will create 1500 individual cooperatives and 300 area cooperative enterprises. Furthermore, the concept note also states that the UCA will provide storage facilities, deliver produce to warehouses, provide market information, and sell products in bulk. These are activities typically undertaken by collectives themselves.

The collectives had gone to court to demanding that the UCA to stop accepting individual cooperatives as members and to restore the previous board of directors. The case was settled out of court before an official from the Finance Ministry notified the collectives about the UCA’s note. Lawyers of the collectives commented, “To our surprise, on February 2, 2009, Uganda Cooperative Alliance had opted out of the court settlement by approaching your ministry to directly finance their activities by a concept paper which is to be presented to your ministry. Our clients’ complaint is that the concept paper excludes them and yet they are members of Uganda Cooperative Alliance.”

Examples of past UCA projects can be found in its annual reports. One current project is the Empowering Farmers Through Agribusiness and Financial Services Project (EFTAF), scheduled to last from July 2007 to December 2010 and undertaken in cooperation with the Norwegian Society for Development (Norges Vel) and the Swedish Cooperative Centre-Vi Agroforestry (SCC-Vi). The project supports 300 individual cooperatives in developing agriculture productivity and marketing. The project also aims to create 45 SACCOs that will cumulatively raise USD 659,000 in share capital, USD 742,000 in savings deposits, and USD 1.24 million in outstanding loans.

Microfinance is quite active in Uganda. The MIX Market, the microfinance information clearinghouse, lists 22 microfinance institutions (MFIs) in the country, many of which are cooperatives or credit unions. A previous MicroCapital story has discussed the USD 133.7 million worth of subsidized loans made available in 2009 by Salim Saleh, the Ugandan State Minister for Microfinance. The loans are to be distributed through SACCOs, in accordance with emphasis on development through cooperatives found in the Finance Ministry’s document “The Plan to Achieve Prosperity for All Ugandans.” In April 2009, MicroCapital also reported on the creation of the new regulatory body for SACCOs.

Uganda has an estimated 2008 GDP, in terms of purchasing power parity, of USD 35.88 billion with a growth rate of 6.9 percent and a GDP per capita of USD 1,100. Agriculture constitutes 29 percent of GDP although 82 percent of the labor force works in agriculture.

Additional Resources:

“War over funds threatens co-op revival”, by David Malingha-Doya, Published by The East African, June 2009
“Gov’t asks Cooperatives to solve in house wrangles”, by Ephraim Kasozi, Published by Daily Monitor, February 2009
Cooperative Societies Statute of 1991
Uganda Cooperative Alliance: Home
Uganda Cooperative Alliance: 2008 Reports
“Uganda’s Cooperatives Rise Again”, Published by African Loft, January 2009
CIA World Factbook: Uganda
MIX Market: Uganda
“Infamous Brother of Ugandan President Floods Microfinance Market with $133m of Subsidized Capital Over 5 Years“, by Ryan Hogarth, Published by MicroCapital, February 2009
“Uganda Government to Set up Regulatory Body to Monitor Work of Savings and Credit Co-operative Organizations (SACCOs)“, by Bharathi Ram, Published by MicroCapital, April 2009
“The Plan To Achieve Prosperity for All Ugandans”