PROFIRA: Project to expand financial services in rural areas
Mar 31, 2015
In order to strengthen and increase access to financial services especially in the rural communities, the Ministry of Finance and Economic Planning last week officially commissioned the Project for Financial Inclusion in Rural Areas (PROFIRA)
By Oyet Okwera
In order to strengthen and increase access to financial services especially in the rural communities, the Ministry of Finance and Economic Planning last week offi cially commissioned the Project for Financial Inclusion in Rural Areas (PROFIRA). The project focuses on increasing access to sustainable financial services by the rural poor through promoting savings and credit cooperative organisations (SACCOs).
The Government-supported project also targets the development of community-based fi nancial services through ensuring sound policy formulation and implementation. Caroline Amali, the State Minister for Microfi nance represented the Prime Minister Dr. Ruhakana Rugunda at the launch of the project at Imperial Royale hotel in Kampala.
In a speech read for him by Amali, Premier Rugunda noted that partners like International Fund for Agricultural Development (IFAD) are playing a tremendous role in increasing fi nancial inclusion.
Rugunda noted that these key development partners in the fi ght against poverty, are helping reach the rural poor people through their consistent support programmes, especially those aimed at increasing access to fi nancial services. The Prime Minister delivered the Government’s pledge of continuing to uplift the unbanked and un-served population from poverty by increasing access to financial services and ensuring they access them at affordable rates.
He applauded PROFIRA as an apt financial inclusion process that should help meet the Government’s mission of increasing financial inclusion in the rural areas. Statistics available at the Ministry of Finance indicate that the percentage of adult Ugandans excluded from fi nancial services has reduced from 30% in 2009 to the current 15%, which is in line with the country’s reduction of absolute poverty from 56% in 2002 to less than 19% at the moment.
CURRENT STATISTICS
Further figures show that, 80% of Uganda’s population lives in rural areas and currently, 35% of the rural population access financial services informally while 32% access through non-bank formal institutions. Seventeen percent of the rural population has access to a formal bank while an equivalent number is fi nancially excluded.
Only 21.5% of the rural population have access to a commercial bank within a radius of 5kms. And 16% of the rural population has access to saving facilities in a formal fi nancial institution compared to 33% in urban areas while 65% of the rural population have no access to credit facilities. Rugunda noted that the main constraints to millions of Ugandans especially those living in rural areas is not because they cannot manage money but due to the fact that they have little of the money.
He explained that while rural micro-entrepreneurs produce high rates of return on the capital they invest, the problem is they lack access to suffi cient funds, which means their aggregate return remains low, leading to the continuous poverty cycle which must be fought. “Therefore, as we launch this programme, I implore you to broaden your focus on the future of rural poverty by widening the scope of investment beyond agriculture to all aspects of rural development.
Experience has shown that more business in rural areas generates the economic incentive to improve infrastructure, which boosts the competitiveness and production,” Rugunda said. “Through this project as its name suggests, I expect empowerment of rural communities to attract and sustain rural investment, by establishing fi nancial institutions (SACCOs) that can provide them with sustainable financial services,” he stressed. He advised that at the inception of programme implementation, all stakeholders should borrow a leaf from the previous programmes especially the Rural Financial Services Programme (RFSP) whose results have been impressive.
He decried the misconception about Government interventions to mean handouts, a factor that resulted into many of the programme SACCOs being unable to stand on their own without external support. Addressing micro-fi nance stakeholders, the State Minister for Micro-Finance, Caroline Amali noted that an area still lagging behind was the fi nalisation of the Tier 4 Microfi nance Law.
Amali said that although a lot in terms of documentation has been prepared, a few hiccups still exist between the line ministries responsible for policy oversight over SACCOs and that of other financial institutions. Amali also suggested that since SACCOs are duly registered as cooperatives with lines of businesses, they should also be supervised for compliance, like any other financial institution.
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