Nwoya District Sets Interest Rate on SACCO Loans

4565 Views Nwoya, Uganda

In short
The Nwoya district authority has introduced new interest rates for village saving and credit organizations in a move intended to increase agricultural production.

The Nwoya district authority has introduced new interest rates for village saving and credit organizations in a move intended to increase agricultural production.
 
Patrick Okello Oryema, the district LC5 chairman says that the new rates under the Local Economic Development program will govern the operation of Saving and Credit Cooperative Organizations (SACCOs) in the district. He explained that the district would levy an interest rate of seven percent on money advanced to the SACCO groups while individual borrowers are expected to pay back at 10 percent interest. He said the initiative is a pilot project with a revolving fund of 25 million shillings.
 
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The rates imply that if, for instance one borrows one hundred thousand shillings, they would pay back 110,000 shillings while a million shillings loan would attract a repayment of a million and one hundred thousand shillings.
 
Oryema said they expect that the rates, which are low compared to the current bank charges, would help farmers to invest in agricultural production, open more land and farm implements. Most commercial banks are charging about 30 percent interest on money borrowed following a similar increase in the central bank rate, the charge that central bank levies on money it lends to the commercial banks and the microfinance deposit taking institutions.
 
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While some of the borrowers have welcomed the rate as affordable if compared to current bank rates, other members are complaining that ten percent is high. Moses Owalo, a resident of Koch Goma Sub County says that he is aware other savings and credit organizations were charging less than ten percent.
 
Most SACCO groups charge interest rate ranging between 2.5 to 10 percent depending on their regulations.