Cooperative unions and societies have been advised not to set high hopes for the revival of the cooperative bank, given the current conditions in the country’s banking sector. The cooperative bank, which was initially established in 1960 to serve cooperative unions and societies, has received approval from the cabinet for revival in the current year.
During a national cooperative consultative meeting with the theme “Co-operatives, Partners for Accelerated Development,” Dr. Fred Muhumza, a lecturer in economics at Makerere University Business School, shared his perspective. He stated that even if the cooperative bank is revived, it may not differ significantly from other banks in the country, and it might not necessarily enhance services due to the banking sector’s regulatory framework.
Dr. Muhumza pointed out that the banking sector is subject to numerous rules, laws, and regulations, which sometimes limit banks’ ability to make independent decisions. He also questioned how cooperative unions and societies plan to secure the necessary capital for the bank’s revival. This raises the question of whether they will seek external financing, await a government grant, or rely on members to mobilize funds.
According to Bank of Uganda regulations, for a bank to be classified as tier one, it must maintain a minimum capital of UGX 150 billion; otherwise, it would be categorized as tier two or three. Mr. Muhumuza stressed the importance of cooperative unions and societies being well-organized before attempting to revive the bank to avoid potential accusations of the bank not providing loans.
State Minister for Co-operatives, Mr. Fredrick Ngobi Gume, emphasized the importance of involving cooperative unions in the revival process. He highlighted that the government views them as co-operators, not as a government agency, and encouraged them to manage their bank, accounts, laws, and plans independently.
Mr. Ivan Assimwe, the General Secretary of Uganda Co-operatives Alliance, assured that as a cooperative bank meant for co-operators, they would be the ones determining the interest rates to charge. He also stated that they would not accept land as collateral; instead, membership in a cooperative union would serve as collateral for accessing finances and loans.