Nakasongola Rural Savings and Credit Cooperative Society Ltd is rural community based, member owned and demand driven Microfinance Institution. It has its head office in Nakasongola Town Council Road in Nakasongola Central Ward, Nakasongola Town Council Sub County in Nakasongola District. The SACCO is about 260 KM from Kampala Uganda. It provides financial services to its members. The members are farmers, rural based civil servants and micro small and medium entrepreneurs (MSMEs). It started operation in 2007.
Case stuy Nakasongola
Nakasongola Rural SACCO registered under of Co-operatives in the Ministry of Trade and Industry under the Cooperative Statute of 1991.The SACCO became the partner of Oikocredit in 2012.
Most Saccos in East Africa face risks. Sometime most of them are not even aware of all the risks they face. Nakasongola SACCO was one of the SACCO that was selected by Uganda office to be supported in Risk Management. Risk Management has been an important intervention by Oikocredit's Capacity Building unit.
The reason for this type of intervention is twofold. One, the SACCO will be able to identify all the risks it faces and mitigate those risks in order of priority. The other reason for supporting this type of intervention is that an institution that manages its risk well will be a good partner for Oikocredit in terms of meeting its loan obligations and serving its end clients.
Nakasongola was selected because it serves members in deep rural areas where economic activities are heavily tilted to agriculture. The other reason of selecting the Sacco is that it had failed before. In 2007, it was revived again.
Previously, Oikocredit had trained 2 consultants in Uganda on the Integrated Risk Management approach and had hired Hans (a Dutch national) to mentor these consultants as they support partners on this intervention.
The approach employed is that one Consultant supported Nakasongola SACCO in identification of risks and supported them to come up with a risk scorecard. Once this was done, the consultant facilitated the organization in risk selection and measurement.
What followed was a prioritization process on which risks to start working on. Nakasongola was then taken through the assessment of current control measures effectiveness. Where current control measures were found to be ineffective, new measures were proposed together with work plan.
The last stage was appointment of risk management committee and the training of the same. The consultant consulted Hans from time to time in areas that were difficulty for him.
Allocation of funds
Oikocredit funds were disbursed directly to the consultant to carry out the above activities. Contribution from partner was utilized to pay the logistical cost of the assessment workshop.
One major lesson learnt is that there are always some follow-up capacity building issues after these interventions. The risks identified in the score card may require different mitigation measures that the organization may not be able to deal with on its own.
It is important to keep this in mind even when budgeting for this type of interventions. In case of Nakasongola, some critical risks were identified and they wanted the consultant to assist them as part of an on-going intervention.
The participants, including the Board and senior management, pointed out that the three identified risk areas (corporate governance, liquidity management and loan appraisal) are critical for the survival of the SACCO and that they would appreciate Oikocredit support to handle them as part of the on-going integrated risk management assignment. The consultant decided to support the SACCO in the above areas even if initially it was not part of the contract.
The other lesson learnt is that it will be important to continue to mentor the organization for at least a period of one year. For example, Nakosongola main risk was on the on good governance which may take some time before is fully integrated into the organization.
"Before the Risk Management interventions the board and management used to have a number of conflicts. We could not understand what the management was trying to do and they could not understand us. In a number of occasions we could make poor decisions. We as the board now understand our roles and management likewise and I believe we will be a better SACCO as we move forward’’ - Sarah, Chairlady of the board of Nakasongola SACCO during the recent interview.
This intervention has achieved a number of successes for this organization:
- The first major achievement is on governance. Before the intervention, the board roles and management roles were not clear. There were cases where the board got involved in day to day activities which should be the functions of management. Management and staff could also take loans from the SACCO without the board approval and some of the board members had conflict of interest. There is now a risk management committee at the board level. There has also been a change in policies on internal loans for staff and the board. The board now has work plan and this is followed up during the board meetings.
- The other major achievement is that the SACCO is now aware of all the risks it faces. The SACCO has a risk management committee in place that keeps looking at how the risks are being dealt with including checking on control measures. The committee meets on monthly basis and prepares a report on Risk Management which is discussed during the board meetings.
- Some other achievement includes reviewing the manuals and by-laws of the SACCO to accommodate issues of risks management. For example the credit manual is being reviewed in light of outcome of these interventions.
- The SACCO also identified lack of good customer care as risk and to this end it has trained its staff in good customer care. In addition the management participated in CPP workshop in Uganda that was organized by Oikocredit. They identified some quick wins that they have integrated with customer care.
- Another achievement mentioned is the decline of exit rate by 2% and improvement in defaulting.