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Kampala, Uganda, October, 11 2010 - The Government, through the Microfinance Support Centre, has launched a $27m (sh60b) project to help the rural poor access financial services.
The rural income and employment enhancement project, jointly funded by the African Development Bank and the Islamic Development Bank, is targeting about 1.4 million poor people.
The project is expected to generate 1.4m employment opportunities for rural clients through the provision of loans and enhance skills through training and business development services and bring about positive changes in business growth, high return on capital and increased household incomes for the rural population.
Speaking at the launch, the finance minister in charge of microfinance, Ruth Nankabirwa, said the money will be channelled through the Rural Financial Services Programme, the Microfinance Support Centre Ltd and the Uganda Corporative Savings and Credit Union.
To access the money, individuals must belong to an established Savings and Credit Cooperative Society (SACCO).
The SACCO also must be legally registered, have clearly defined areas of operation, clear ownership and governance structure and should have products for onward lending.
The chairperson of the Microfinance Support Centre, Dr. Specioza Wandera Kazibwe, emphasised that the project is an important input to the centre's 2009-2014 strategic plans.
The plan comprises two key components - the Financial Services and Institutional Development Services.
Under the financial services component, an estimated 1.4 million rural clients, of whom 50% are women, will be reached, while maintaining gender parity and disbursing some 2,934 loans through financial intermediaries.
The component on institutional and business development services will strengthen the capacity of 1,000 intermediaries and provide business development skills to some 3,000 staff together with a performance evaluation mechanism.
"The strategy is hinged on the intervention cycle, which puts emphasis on savings, credit and investment in productive activities to improve production and processing of value addition, as well as market access," Nankabirwa said at the launching ceremony.
The Government initiated the project to guide the development of the financial services delivery in rural areas. The money was approved by Parliament in May 2010.
The project is scheduled to run for five years. It comes after the
poverty alleviation project (1994-1998) and the rural microfinance support project (2000-2008), which were both supported by the ADB. A total of sh22b was lent out to over 70,000 clients under the two projects.
Nankabirwa assured the representatives of the banks that funded the project of the Government's commitments to account for the money and also to ensure that it reaches the intended beneficiaries.
She noted that some Muslims had negative perception about borrowing money with interest. "I call upon the Muslims and all other Ugandans to take the opportunity and access this money though their rural financial organisations. You note that the money was given by the Islamic bank. We shall also try and reach the urban poor," she said.
Africa Development Bank representative Patrick Khaemba noted that studies conducted on Uganda's microfinance industry in 2007 and 2008 indicated that 62% of Ugandans have no access to financial services and 50% of the credit demand by the rural population has not been met. Approximately, 70% of the rural population, especially women, are without access to financial services, Khaemba noted.
"ADB has been supporting microfinance development in Uganda since 1994 with the aim of facilitating access to affordable financial services to the rural poor," he said.
The sh60b boost comes at a time the Microfinance Support Centre (MSC) is boasting of disbursing over sh66b to its clients estimated at 1,475. These clients include savings and credit cooperative organisations (SACCOs), unions, small and medium enterprises and microfinance institutions.
MSC is government-owned and incorporated in 2001 as a company limited by guarantee. It is the linchpin of Uganda's micro-credit programmes serving to implement the rural financial services programme.
The firm facilitates access to affordable, sustainable and convenient financial and business development services to active and productive Ugandans.
It also supports legally established entities engaged in agricultural value chain, production, processing and marketing.
According to the executive director of the Microfinance Support Centre, Charles Byanyima, the project was conceived on the factors affecting rural financial intermediation, which include the absence of strong retail capacity in microfinance institutions, extending access to financial services to rural areas, and weak infrastructure.
"(It) will contrite towards poverty eradication in rural Uganda by facilitating access to and utilisation of affordable financial and business services," Byanyima said.
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