PDM’s core design flaw: When financialisation becomes development: Winners and losers

________________

OPINION

By Dr Samuel B. Ariong (PhD)

President Yoweri Museveni launched Uganda’s Parish Development Model (PDM) in Kibuku, one of the poorest districts in rural Eastern Uganda, presenting it as a decisive break from the country’s long history of fragmented, top-down poverty reduction programmes.

By positioning the parish as the primary unit of intervention, the framework promised to bring development closer to the masses and transition subsistence households into the money economy.

Yet from the outset, the PDM carried a central contradiction. Though framed as a community transformational model of development, it considered finance not as one instrument among many, but as the core driver of development.

Money was expected to perform the work that institutions, production systems, and governance structures had not yet been built to sustain.

In my earlier submissions (2021–2022), I argued that anchoring a national development programme on a large-scale revolving fund, without first strengthening governance capacity, aligning incentives, and establishing institutional discipline at the parish level, would not merely complicate implementation. It would divert the programme from its stated purpose.

The Auditor General’s latest report has now converted that conceptual warning into empirical fact.

Since the 2021/22 financial year, nearly sh3.38 trillion has been spent on the PDM. Of the sh3.26 trillion released to more than 10,500 parish SACCOs nationwide, over sh508.6 billion remained undistributed by June 2025. Even more troubling, sh106 million withdrawn by 62 SACCOs could not be accounted for.

These are not marginal leakages in an otherwise functional system. They are structural symptoms of a model that mistook the circulation of money for the creation of value.

The pattern was neither accidental nor unforeseeable. Earlier poverty reduction initiatives had exposed similar flaws and offered lessons that were ignored. Injecting credit on a scale into parishes characterised by weak financial literacy, politicised local leadership, and fragile accountability mechanisms predictably rewards proximity to power rather than productivity. In such contexts, finance becomes a political resource, not an economic one. The Auditor General’s findings mirror this diagnosis with forensic precision.

What has emerged is not broad-based empowerment, but a familiar cycle of rent-seeking, duplication, and elite capture, classic outcomes of premature financialisation. Once money arrives before institutions, it concentrates opportunity rather than democratising it.

The near-collapse of the Parish Revolving Fund’s sustainability logic is especially revealing. Despite the expiry of grace periods for the first cohorts of beneficiaries, loan recovery has barely begun. Only 18,105 beneficiaries across 30 districts had initiated voluntary repayments by the time of audit, yielding just Shs9.34 billion, statistically insignificant relative to the outstanding portfolio.

A revolving fund that does not revolve is not a development instrument; it is a disguised grant system, vulnerable to politicisation and fiscal exhaustion.

The Auditor General attributes weak recovery to loans processed outside the Parish Development Management Information System (PDMIS) and poor communication of repayment timelines to SACCO boards. These are valid proximate causes. But most importantly, they reinforce a deeper structural gap: the programme prioritised rapid financial rollout over institutional readiness.

This was not an implementation accident; it was a design flaw.

The PDM elevated financial inclusion from one pillar among several into the programme’s predominant logic. In doing so, it lowered poverty reduction efforts to loan disbursement and conflated access to credit with structural transformation. Yet credit, absent productive capacity, value chains, and market discipline, does not transform economies. It monetises existing vulnerabilities.

The result is a programme whose financial machinery is more developed than its productive base. Money moved faster than institutions could absorb it. Credit expanded without value chains to discipline it. Accountability was expected to emerge after trillions of shillings had already entered politically mediated local systems.

This dynamic reflects a broader tendency in contemporary development policy: substituting finance for state capacity, and liquidity for structural reform. The PDM magnified this tendency by pushing it to the lowest administrative level, where safeguards are weakest and political pressures most intense.

The audit, therefore, does more than catalogue mismanagement. It exposes a flawed theory of change. Financialisation, introduced without sequencing, safeguards, or institutional maturity, became a diversion from development rather than a catalyst for it.

Policymakers now face a critical choice. If the response is limited to tighter audits, stronger supervision, and incremental technical fixes, the programme will continue to leak because its incentive structure remains intact. One cannot audit away structural misalignment, nor supervise into existence institutions that were never adequately built.

If, however, the government accepts a harder lesson, that development cannot be engineered through credit first and institutions later, then the Auditor General’s findings may yet serve a corrective purpose. That would require re-centring production, rebuilding local governance capacity, and treating finance as a sequenced tool rather than a substitute for development itself.

For now, the evidence is stark: the Parish Development Model did not fail despite its financialisation. It faltered because of it.

The writer is a lecturer, researcher, and development policy scholar