Compulsory saving for security forces long overdue

By Paul Busharizi

Police chief General Kale Kayihura has mooted a plan to have all policemen enrolled in the Uganda Police Force’s savings & credit cooperative scheme (SACCO).

The four-year old police SACCO has a membership of 21,000 and has accumulated savings of about sh3b.\

During the SACCO recent Annual general Meeting Kayihura reported that the SACCOS was started on his prompting after he had seen the benefits accruing to the soldiers of the UPDF, whose SACCOS, Wazalendo is the largest cooperative savings scheme in the country.

How the SACCO works is that the membership pledge to save a part of their income monthly, which gives them the right to borrow multiples of their savings – up to thrice their savings, for a given period of time. Of course being a member of a SACCO does not wipe out your financial issues.

But what the SACCO does is encourage savings, provides relatively cheap access to credit and maybe most importantly it brings more and more funds into the formal financial sector.

One of the reasons lending rates are so high in Uganda today is our low savings rate, which stands at less than 10% of GDP. Whereas people have argued that Ugandans save in buildings, livestock and other products, the power of this kind of savings is not leveraged for the general good of the society.

Banks make money by lending out their clients’ savings. The more savings there are in the system the more the banks have to lend and by the laws of supply and demand the cost of borrowing will reduce.

According to some statistics more than one in two shillings in circulation is not in the formal sector, they are mostly squirreled away under our mattresses or in holes in the ground. This hidden money is as good as wasted. Whereas it being in the banks means that it is being employed by other clients who have need for it when you don’t and in so doing driving the economy.

The ripple effect of your bank account has a power we are little aware of.

Unlike private sector workers who are mandated to save with the NSSF, our men and women in the forces don’t save for their futures relying on a government pension that is not home to write home about.

The SACCO while not a pension scheme would be a good leg up for retiring servicemen but also allow access to funds during ones working life to invest and prepare for the future.

So yes, Kayihura should follow through with his plan to conscript all policemen into the savings scheme. They will thank him later.