The Community Empowerment through Cooperative Financial Services (CECOFIS) championed by Mbale District's local government, located in Mbale Southeastern Uganda lies about 190 km northeast of Kampala near Mt. Elgon, Eastern Uganda.
With a population of 721,242 occupying an area of 2,467 square kilometers, 92 per cent of the region's population lives in the rural area with the primary activity being subsistence agriculture. Some of the main crops include coffee, beans, plantains, maize, onions, and sweet potatoes. The average rainfall is 1,500 mm per year, but the rainfall average rises to 2,000 mm on Mt. Elgon where the rivers of the district originate. The high rainfall is supportive to the intensive agriculture, which forms the backbone of the district's economy. The region is mainly populated by the Bamasaba or Bagisu ethnic community, whose language is Lugisu, commonly spoken in the district.
One of the biggest challenges facing the majority of the local people is the difficulties in accessing credit for business purposes. Banking services are out of reach for the majority of the poor. For example, many cooperative societies aiming to provide financial services to the poor have collapsed due to mismanagement at the local level or interference from the political elite. This situation made the environment conducive to the mushrooming of "loan shark" businesses or informal money-lenders who charge exorbitant interest rates on loans and the phenomenon of illegal "pyramid schemes."
However, help came from an unlikely quarter in Mbale district.The Community Empowerment Through Cooperative Financial Services initiative in Uganda started in January 2003 as a result of a deliberate move by the district council of Mbale to eradicate poverty through the formation of savings and co-operative rural financial institutions in all sub-counties in the district: Mbale, Kamuli, Mukono, Masaka, and Bushenyi. It is rare to find local authorities, especially in Africa, providing microfinance services. Local authorities are better known for providing services such as water, infrastructure, and educational and basic health services in their areas of jurisdiction. The project seeks to eradicate poverty through the formation of savings and cooperative rural financial institutions in the form of savings and cooperative societies (SACCOs).
At first, many people were sceptical about CECOFIS and dismissed the idea as being too ambitious. Today it sets the pace for other counties in Uganda. In addition, the model has been adopted by the Ugandan government to be applied by local authorities around the country.
The program was initiated to help the community mobilize and manage their own financial resources in recognition of their needs. The project was based on certain principles, one of them using the communities' own institutions, which they control. They also make use of these institutions to benefit themselves. This implies that by simply providing the community with the capacity to run their institutions better, they eventually prosper from them.
The project has been integrated into the District Development Plan (DDP) to meet recurrent expenditures of the District Planning Unit. It targets farmers, women, youth, people with disabilities, and small businesses. Initial funding came from the members' pooled resources and the Mbale District Local Government. Uganda Co-operative Alliance, Microfinance Support Center Ltd (MSL) and the Private Sector Foundation have played a great role in building capacities of beneficiaries.
Currently, SACCOS have been established in four sub-counties with membership ranging from 400 to 1,000 in each. Communities have also been able to mobilize share capital of slightly over 60 million, with a loan portfolio of over 70 million. Resources gathered have boosted household incomes, facilitated payment of school fees, and improved animal feeding, sanitary facilities, and shelter. At the heart of each SACCOS is its user-friendly savings accounts; CECOFIS maintains strict and conservative liquidity guidelines so that 80% of all funds are not available for lending. This rigorous fund maintenance enhances the sustainability of each SACCOS. In addition, the project promotes short-term loans (3 months or less, to groups or individuals). The purpose of this short turnover is to ensure the financial solvency of each SACCOS. This three-month period also represents a shift from more traditional twelve-month loan periods that favor the production of export crops on an annual basis over the more urgent needs of the family or household.
Based on past experiences, the Mbale District Local Government learnt in good time that these institutions must remain in the hands of the beneficiaries. In order to ensure gender equity, Mbale Local Authority has ensured that 30 percent of those in the SACCO executive committees are women. This compliments the gender-friendly policies within the institution.