Uganda's SACCOs Embrace Digitalization for Growth and Financial Inclusion

Savings and Credit Cooperatives (SACCOs) in Uganda are rapidly modernizing their operations through digitalization, a move that is proving crucial for their growth and for extending financial inclusion to previously underserved populations.

Traditionally, SACCOs have been vital for connecting low-income individuals, particularly in rural Uganda, to financial services. However, their manual, often rudimentary, operational methods have historically limited their potential. The increasing prevalence of mobile phones and mobile money services across the country has provided a powerful catalyst for change. With access to these technologies, SACCOs can now reach more members and offer a wider array of services more efficiently.

Nyabyumba Farmers Sacco in Kabale district exemplifies this transformation. Previously relying on cumbersome manual record-keeping for savings, loans, and membership, the Sacco has transitioned to a digital system. This change has led to faster transactions, more accurate reporting, and increased member satisfaction. “Service delivery has improved tremendously,” states Ambrose Akankwasa, General Manager of Nyabyumba Farmers Sacco. “Transactions are faster, reports are accurate, and members are satisfied because they can now save and pay loans using mobile money.”

The impact of this digitalization is evident in significant financial growth. In a single financial year, Nyabyumba Farmers Sacco saw its savings portfolio jump from Shs200 million to Shs800 million, and its loan portfolio expand from Shs700 million to Shs2 billion. Membership also nearly doubled, from 2,000 to 4,500.

While initial resistance from members regarding new system charges and potential fraud was present, the benefits quickly became apparent. Faster loan approvals, instant SMS alerts for transactions, and reduced travel costs have largely changed members’ perceptions. Furthermore, the digital system has become a revenue generator through mobile banking commissions, offsetting procurement and subscription costs. “Last year, after covering all costs, we made a profit of over Shs10 million from the system,” Akankwasa reveals.

Despite challenges such as intermittent internet connectivity in some rural areas and the need for user training, the overall outlook for digitized SACCOs is optimistic. Experts believe that within five years, SACCOs could operate much like commercial banks, offering services like ATM access and instant loan applications. Digitalization is increasingly seen not as an expense, but as an essential investment for the future growth and sustainability of Uganda’s SACCO sector.

This transformation is critical for bridging the financial inclusion gap, ensuring that more Ugandans, even those in remote villages, have access to essential financial tools. The widespread adoption of mobile technology, even basic feature phones, makes these digital services accessible to a broad segment of the population.

Source: Daily Monitor (Uganda)