Extending credit to women critical to spurring household livelihoods

By Frank Mugabi

One of the greatest challenges in our economy is the strain in accessing credit.

It is a quandary Ugandans generally face irrespective of the traditional gender or net-worth biases. Many astute businessmen confess of how it is problematic for them to access credit from the mainstream financial institutions, even when they comfortably fall into the bank's creditworthy category of clients.

It gets worse for the vulnerable members of society, particularly the women, worse still the rural women.

Some microfinance and banking institutions have done well rolling out various credit facilities for micro, small and medium-sized women entrepreneurs in groups. But the terms are distressing. The repayment periods are too short and the interest rates are high. Commencement of repayment is expected within 30days of the funds hitting your account. The loan could have also been subjected to numerous deductions. This instantaneously triggers panic as clients dash to meet the bank's terms of repayment. Suddenly, nothing matters to the client besides struggling to offset the credit. 

This has kept majority of the women in a cycle of borrowing because much of their profits are recouped back to the bank in interest. So a woman somewhere, say in Jinja Central market, who first borrowed years back to boost her second hand clothes business remains the same since the financial institution has mastered the art of draining her profits.

For the rural women, it is even worse. Besides the inadequacy of financial institutions in their areas, they do not not have the collateral required to access credit.

This status of events represents a disjoint in our quest to become a middle income economy by 2020. Going by statistics, women constitute about 51% of the Ugandan population of 34.9 million (Census, 2014 results).  The economically active population is 11.5 million of which 53% are women. How then, is it possible to march on to Middle Income without the involvement of the larger part of the economic development players?

Less than 12% of economically active women are in paid employment; the remainder are either self-employed or contribute unpaid family labour. Even in paid employment, women are more likely than men to be in low-status, poorly paid jobs. Despicable!

Women are specifically cited as important actors in the small and medium enterprises (SMEs) subsector in Uganda. They own and operate a significant percentage of the SMEs, albeit, mostly at the informal level. Again, women are majority players in the informal sector; constituting about 86.2%. The women-owned enterprises have been observed to impact positively on both employment and wealth creation. They contribute to the promotion of a more equitable distribution of income; stimulate local development; culture of entrepreneurship and business-related skills within the local populations.

Yet women face a number of challenges and barriers as they attempt to start and grow their own enterprises.

Sufficient evidence indicates that they have difficulty accessing financing due to collateral constraints; they have unequal access to land and property titles through matrimonial and inheritance laws;  they are stifled by laws requiring them to have permission from their husbands to borrow money; they are subject to patriarchal controls within their families, thus limiting their mobility and economic independence; they lack information regarding business opportunities; they have limited access to affordable technical training and operate within a cultural environment that reflects limiting stereotypes regarding their potential to grow enterprises.

Lack of education limits the scope of women's enterprise activity and is one of the largest causes of poverty for Ugandan households.

Finally a remedy

These are the issues that informed the Government's initiative to start a special credit facility for women. Dubbed the Uganda Women Entrepreneurship Programme (UWEP), or the Women Fund as is popularly referred to, the programme is aimed at improving access to financial services by women and equipping them with skills for enterprise growth, value addition and marketing of their products and services.

Managed under the Ministry of Gender, Labour and Social Development, the programme extends interest-free credit to women in groups on a revolving basis. This is the first time since Independence that the Government has created a fund specifically designed to empower Ugandan women to improve their income levels and their contribution to economic development.

Women residing in the same sub county or division are required to form a group of between 10-15 members. They can then access a maximum of sh12.5m or sh25m for unique projects with potential to create multiple job opportunities.

As a remedy to the short repayment period and high interest in the mainstream financial institutions, UWEP beneficiaries are given a grace period and loan term based on the maturity period of the enterprise (the time at which the enterprise begins generating income).

The maximum loan term is three years (36 months). Groups that repay the revolving fund within the first 12 months of receiving the fund, pay only the principal without interest.

Any repayments that go beyond 12 months attract a service fee of 5% per annum on remaining balance to cater for the costs of inflation. Groups are free to apply for another loan after clearance of all outstanding payments.

Since the women are in total control of the profits they make, they are being encouraged to share out their earnings in; reinvestment into the enterprise, savings and repayment of the loan. Savings will go towards economically empowering the individual women group members to create impact at the households.

Within the one year of implementation, up to sh3.7b has been disbursed out to 577 women groups within Kampala Capital City Authority (KCCA) and the districts of Wakiso, Koboko, Kitgum, Kisoro, Bundibugyo, Kiruhura, Kaliro, Kamuli, Moroto, Katakwi, Mayuge, Nakasongola, Kalangala, Ntungamo, Otuke, Kole, Kibaale, Kayunga and Nebbi.

A total of 7,349 women have been reached through the funded groups.

The ministry is also in the process of disbursing sh8b going out to 1,655 women groups with 19,503 beneficiaries before end of this month (May).

We are now seeing women break barriers and venturing into male-dominated work fields.  Epikosi Ikiliok Welding and Metal Fabrication Women Group in Katakwi district is a classic example of how the programme is helping women break the work barriers.

The group is now the only source of metal fabricated products in an area about 40km away from Soroti town. In the same district is a women group retailing motorcycle spare parts and another that has set up a bakery.  

In West Nile (Koboko and Nebbi), groups that previously made handcrafts have stepped up production after getting a much-deserved financial boost. In Western Uganda, women are now proud owners of Irish potato fields and bull fattening projects.

The tide has spread to Karamoja, central and the eastern regions with women involved in diverse economic activities. And yet, within barely two months of receiving the funds, many of the women groups started making repayments.

The women, many of them rural-based, can now celebrate their engagement in valuable economic activities. The call goes to all men and children to render support to the women benefiting from UWEP because an empowered woman will empower her household and the nation at large.

Writer is the Communications Officer, Uganda Women Entrepreneurship Programme (UWEP), Ministry of Gender, Labour and Social Development.