GROUP ONE

NAME SIGNATURE

ANKUNDA SHEBA

ACHIRO PEACE

OGWANG DAVID EMMANUEL

ONOKE JOHN VALENTINE

ACHENG NESTOR FAITH

BWIRE JONAH

AJILO CLAIRE MWEBAZA

ATIMANGO HARRIET

ABER MERCY ROBIN

ANENA GLORIA ATUBE

ALIER JAMES ATEM GHAK

ABALO BELINDA

ACIRO NELLY

LUBANGAKENE ANDREW BRUCE

OLUK GERALD ALBERT

AKULU LINDA

APIYO EUNICE

SSEGONGA DOREEN

OWACGGIUW DERRICK RICHARD

TUMUSIIME DAVID

MBEIZA TESAGA JOANITA

AUMA LAURA
ASIMO MARY

HASASHA NAUME SARAH

SACCO is an abbreviation for Saving and Credit Cooperatives. These are user-owned financial
institutions that offer both savings and credit services to their members. It simply means coming
together of members for the object of promoting their economic and social interest in accordance
with cooperate principles.1 Members of these financial institutions can be both net savers and net
borrowers. They are normally established by voluntary people based on the philosophy of
building self-help society or people helping people. They are most times owned, managed, and
controlled by members. Members have the right to decide on its issues, members have the right
to benefit from its service. SACCOs are not for profit or for charity but serve members at fair
profit margins. Members’ savings form a good pool of money, from which loans are made to
members with fair lending interest and the interest rate is decided by members. In general
SACCO Society are financial institutions designed for people, to have their own efficient
financial service giving institutions that empowers themselves in building asset by teaching thrift
culture and make themselves accessible to credit in sustainable way.

History

The cooperative movement in Uganda can be traced as far back as 1913 when the first Farmers’
Association was founded by African farmers in response to exploitative systems by Asian
traders. However, formal regulation and supervision of cooperatives started with the enactment
of the 1946 Cooperative Ordinance. The Ordinance was later amended by the Cooperative Act of
1952 which was also amended by the Cooperative Societies Act and Rules of 1963. The 1963
Act that was repealed and replaced by the 1970 Cooperative Societies Act. Consequently, the
Cooperative Societies Statute was enacted in 1991 and later transformed into the Cooperative
Societies Act Cap 112 with the objective to amend and consolidate the law relating to the
constitution and regulation of cooperative societies and other matters connected therewith.

To date, the constitution and regulation of cooperatives in Uganda is thus governed by the
Cooperative Societies Act Cap 112, which commenced on 15th November, 1991 and
operationalized by the Cooperative Societies Regulations SI 112-1. This law provides for
registration of societies, rights and liabilities of members, duties of registered societies, duties
and privileges of the board, supervision and inspection of affairs, dissolution of cooperatives and
dispute resolution.

Besides the Cooperative Societies Act, the Tier 4 Microfinance and Money Lenders Act, 2016,
governs the licensing and management of Tier 4 microfinance institutions which include Savings
and Credit Cooperatives Societies (SACCOs). This law came into force on 1st July, 2017 but it is
not yet operationalized since the Minister in charge of Finance has not yet made its regulations.
Additionally, the Tier 4 Microfinance and Money Lenders Act, 2016 amended some provisions

1
Section 3 of the Coperative Societies Act Cap 112
of the Micro Finance Deposit Taking Institutions Act, 2003, to empower the Bank of Uganda to
regulate the licensing of large SACCOs.

The history of SACCOs in particular, can be traced based on two origins of modern cooperation.
The first modern cooperation emerged in certain working-class environments in European
industrial cities in 1840s, particularly in Great Britain and France. These pioneers invented
models of the consumer and labor cooperative that defend and promote the interest of working
class in the face of the social disasters endangered by the Industrial Revolution (Assenga, 2008).
In Uganda, savings and credit cooperatives (SACCOS) are financial intermediaries, channeling
savings into loans, provide saving opportunities for the teachers, especially in the rural areas.
Evidence shows that teachers are looking for opportunities to save their income in case of
emergencies or to be able to undertake larger investments in the future. There is a high potential
to mobilize savings among low-income people in Uganda.

Formation of SACCOs

Pursuant to Section 362 which is not yet been operationalized, SACCOs must be registered
societies and licensed under this Act. Section 38 is to the effect that a SACCO that intends to
carry on the business of financial services among its members shall apply to the Authority for a
SACCO license. A society which has for its object the promotion of the economic and social
interests of its members in accordance with cooperative principles and which, in the opinion of
the registrar, is capable of promoting those interests may be registered under this Act with or
without limited liability; except that a cooperative union or any apex society shall be registered
with limited liability3.

Section 4 of the Coperative Societies Act Cap 112 provides for Conditions of registration which
among others include that; the society consists of at least thirty persons all of whom are qualified
for membership of the society under section 13; and that in the case of a secondary society, it
consists of at least two registered primary societies among its registered members, similarly, in
the case of a tertiary society, it consists of at least two registered secondary societies among its
registered members. In the case of an apex society, it must consist of two or more secondary or
tertiary societies.

The Act further provides for procedure Application for registration. Section 5 of the Act is to the
effect that for the purpose of registration, an application to register shall be made to the registrar.
Besides that, the application shall be signed in the case of a primary society, by at least thirty
persons qualified for membership of the society under section 13; and in the case of a secondary,
tertiary or apex society, by a person duly authorised for that purpose by each registered society,
who is a member of that society. Clause 3 of section 5 further states that the application shall be
accompanied by four copies of the proposed byelaws of the society in English, and the persons

2
Tier 4 Microfinance Institutions and Money Lenders Act
3
Section 3 of the
by whom or on whose behalf the application is made shall furnish such information in regard to
the society as the registrar may require.

All cooperatives seeking registration in Uganda are required to have a name which is unique to it
and does not resemble the name of another cooperative which in the opinion of the Registrar
might mislead the public; the name should include the word “cooperative” as part of the name of
the cooperative. They are also required to use the word “limited” as the last word of the name of
the cooperative, in addition to having an office with a registered address; and bye-laws.

The Registrar is required to keep or cause to be kept at his or her office two registers namely; the
Register of Societies and the Register of Probationary Societies. Upon registration, a cooperative
is issued with a certificate of registration and becomes a body corporate by the name under
which it is registered, with perpetual succession and a common seal, and with power to enter
contracts, to institute and defend suits and other proceedings as well as doing all things necessary
for the purpose of its constitution.

Functions of SACCOs

Encouraging and promoting members to develop their thrift culture, as well as the community by
teaching wise use of their money and efficient management of their limited resources,

Teaching people how to create an asset that helps them to have a guarantee and collateral for
future loan access,

Make members more accessible for finance when they need it,

Develop a linkage between the rural people and urban banks in order to have sustainable
financial flow.

Allow and encourage members to develop formal business and investment, facilitate them with
sustainable loan services,

Encourage members to buy shares in the appropriate amounts by leveraging with their savings at
the appropriate times; using those shares guarantee the savings and loans of the members, by
providing the correct amount of liquidity in the SACCO Society to manage risk of withdrawal or
late repayment;

Retaining some profit from interest earned on the lending operation to pay dividend to the
members on the basis of the shares owned; redistribute the profits to the members as dividend on
the basis of shares owned.

The government of Uganda has chosen SACCOs to provide access to financial services
implemented through a development program the “Prosperity for All” commonly known as
Bonna Bagaggawale, geared towards improvement of household incomes and people’s
livelihoods.
Membership

To qualify for membership, one must have attained the age of eighteen years and be a resident
within or in occupation of land within the society’s area of operation as prescribed by the
relevant byelaws4. A person above twelve years may become a member of a cooperative but such
person is ineligible to act as a committee member 5. A company or an unincorporated body of
persons can only be a member of a cooperative with the Registrar’s written permission. A
cooperative may, with the approval of the Registrar, limit the maximum number of its members.
Membership in an existing cooperative is voluntary provided a member adheres to the
procedures laid down in the byelaws.

SACCO society is founded by cooperation of voluntary people to help each other with voluntary
and open to all principals.

Based on these principles

Anyone who is ready to accept the bylaws, policies and regulations of that SACCO may join and
share its owner ship,

Anyone who is able and willing to save the minimum of saving adopted by the society may join
and share its owner ship,

Anyone who is living around and participate actively may join and share its owner ship.

Anyone who is able to use the services and willing to accept the responsibilities of membership
stated by general Assembly may join and share its owner ship.

Members’ responsibility

I. In SACCO Society members' savings pool a lot of money that will lend to member.

ii. Therefore, members should be serious in knowing and take the following responsibilities

The affairs of members in a cooperative are governed by byelaws. Each member of a registered
society has one vote only and, in any case, where the votes are equally divided, the provisions of
the rules of procedure made by the cooperative decide. A registered society, a cooperative union
or an apex society which is a member of any other cooperative has as many votes as may be
prescribed by the byelaws.

It is mandatory for every cooperative to elect a committee consisting of the chairperson, vice
chairperson, the treasurer and not less than two or more than six members. The Committee is the
controlling authority of a cooperative and must appoint a secretary who is either a member of the
Committee or paid employee of the society. In Sitenda Sebalu & Anor v The Register of Co-
4
Section 13(1)
5
Section 13(2)
operative Societies & 6 others6, it was stated that the committee is the one with powers to deal
with the Sacco and therefore the registrar’s intervention was unlawful and uncalled for.

However, despite the easily accessible loans provided by Sacco’s, there has been a challenge of
interest rates and fines to be paid by the borrowers which seem excessively high. In the case of
Erussi Village Savings & Credit Society Ltd v Chome Phillips 7, the defendant had failed to repay
a loan whose interest was 4% monthly and a penalty of 6% monthly on default. Justice Nyanzi
stated that, “there is no way a person who has defaulted in a loan can pay both such high interest
and penalty on default. The interest is unreasonably excessive.”

6
[2013] UGCOMMC 16(31 january,2013)
7
[2013] UGHCCD 36