The confusion that was created yesterday as a result of trying to explain the increased interest rates demanded by the SACCOs has forced me to assist and define the two institutions.
Let me begin with Umurenge SACCOs.
Umurenge SACCO is a government initiative aimed at increasing the financial inclusion to Rwandan citizens. The concept of Umurenge Savings and Credit Cooperatives (Umurenge SACCOs) was based on an understanding that banks and other financial institutions were more concentrated in urban areas whilst the majority of the Rwandan population lives in rural areas and totally excluded from the formal financial institutions (MINECOFIN, 2009).
Umurenge SACCOs was established in 2008 with the aim to boost up rural savings and provide Rwandans with loans to improve their earnings and enhance their livelihoods.
Umurenge SACCOs offer basic microfinance services.
Deposit Products at SACCOs
1) Current Account
2) Time deposit (4%)
Retail Loans
1) Overdraft account
2) Agriculture Livestock
3) Commerce
4) Construction
5) Transportation (Motorbike/bicycle)
6) Advance on salary
7) Handcraft
8) Health loan for group or individuals
VUP
Vision 2020 Umurenge Programme (VUP) is an Integrated Local Development Program to Accelerate Poverty Eradication, Rural Growth, and Social Protection.
This is a government initiative in collaboration with development partners and NGOs.
It is led by the Ministry of Local Government, (MINALOC) and supported by the Ministry of Finance and Economic Planning (MINECOFIN).
The Vision 2020 Umurenge Program (VUP) uses the existing decentralization system and leverages technical and financial assistance to accelerate the rate of poverty reduction in Rwanda. The aim was to eradicate extreme poverty by 2020.
How it works
First, data is collected in a survey and shared with Local Administrative Entities Development Agency (LODA) and MINALOC for consolidation nationally. Data usually collaborates with that of the Integrated Household Living Conditions Survey (EICV). The statistics in this survey assist in the planning process.
The survey looks at the level of poverty, level of disease, school enrollment, land owned, food production, and other phenomena.
And then a nationwide assessment of income levels of all households is conducted and members are placed in any one of four categories, having been reduced from six after it was discovered that the first phase of VUP had helped lift 1.2 million Rwandans out of extreme poverty.
Following categorisation, as already indicated, the programme begins to plan how to disburse funds to support those identified as being in need of assistance.
The exercise is as detailed as it is rigorous.
Notably, the ranking process takes into account the information beneficiaries and community leaders provide to the officials responsible for drawing up the categories.
Also, the process considers the perception and judgment of other members of the community regarding the wealth or poverty of potential beneficiaries, an exercise guided by what is known as ubudehe.
VUP uses ubudehe poverty categorisation to identify extremely poor households.
Categorisation is done annually (around June) prior to the start of the following financial year. The ministry of finance is presented with a budget to finance the assistance programme.
When the national budget is presented, it allocates the funds as requested by the ministry of local government.
What does the assistance consist of?
1: Direct Support
It comes in the form of a cash grant or a monthly stipend (inkunga y’ingoboka). Those who receive direct support are usually extremely poor households in which there are no adults or where adults are not able to do manual work.
Everyone who meets the relevant criteria receives support. A household with one person, for example, used to receive Rwf7, 500 ($9). That has now been increased to Rwf19, 500 ($24) per month or Rwf234, 000 per year.
The amounts vary depending on the number of members a household has.
Households receive direct support for as long as they continue to meet the targeting criteria. Households report spending the money on food, household utensils, clothes, health insurance, education (books, uniforms), rent, and on purchasing land, livestock, agricultural inputs, house building and renovation, income generation projects and savings
2: Public Works
This entails paid employment on community infrastructure development projects. It is available to extremely poor households with at least one adult that is able to do manual work. However, how many people get jobs is dependent on the budget and the number of openings. The compensation is no higher than the market wage for similar work. An 8-hour working day is standard.
Almost 90% of the public works budget has gone on labour wages. Most public works so far have been in environmental protection (mainly anti-erosive ditches and radical terraces) or road construction.
More recently there have been opportunities in the construction of school classrooms, markets, water infrastructure, health centres, improved stoves and furnaces, and bridges.
3: Financial Services
One of the objectives of VUP is to increase access by poor households to financial services. Efforts have therefore been made to extend the coverage of services to poor and remote areas and to help poor households join the formal financial system. All VUP beneficiary households have accounts, mostly with SACCOs.
Saving is encouraged, but is voluntary.
The Ubudehe Credit Scheme (UCS) was introduced first, in January 2010. Households can apply for individual, group, or cooperative loans. Applicants submit proposals for viable and profitable income-generating activities as long as they are able to demonstrate capacity to manage the credit. Also, they must have a bank account.
Further, they must sign a performance contract with the authorities at the umudugudu, cell, or sector level, depending on residential location of loan applicant.
Loans range between Rwf60000 and Rwf100,000 at a rate of 11%, with no collateral payable in 12 months. Off-farm income-generating activities are encouraged, but agricultural and livestock enterprises are also eligible.
Confusion on interest rate
Since 2008, interest rate was 2%, and was later increased to 11%.
Can you now differentiate between VUP and Umurenge SACCOs?
In one word, SACCO’s terms were expanded to VUP, yet two systems are different. The later is social protection while SACCO is a quasi bank.
Although all VUP funds are channeled SACCOs, they do not belong to SACCOs.
Nevertheless, as testified yesterday by a one Karengera, a participant from Nyaruguru, VUP has dramatically transformed millions of Rwandans, despite shortcomings suffered by the scheme subjected upon it by some individuals.
