FinScope 2023: SACCOs now lend to as many Ugandans as mobile money does

For years, the story of Ugandan finance has been told as a mobile money story. The 2023 FinScope survey complicates that picture. According to the findings, SACCOs and mobile money are now joint leaders as sources of credit for adult Ugandans, each reaching 16 percent of adults — about 3.9 million people apiece. No bank, microfinance institution or credit institution comes close.

The survey, conducted by Financial Sector Deepening Uganda with funding from the Bank of Uganda, Abi Finance and the Bill & Melinda Gates Foundation, sampled more than 3,176 people to represent Uganda's 24.6 million adults aged 16 and above. That adult population has itself grown sharply, from 18.6 million in 2018.

The headline matters for the cooperative movement because it confirms what SACCO managers have long argued: member-owned financial institutions are not a marginal informal sector but a core part of how ordinary Ugandans borrow.

FinScope found that at least 51 percent of adults — about 12.5 million people — had borrowed from some source. Mobile money and SACCOs together accounted for about 7.8 million borrowers. Banks trailed at 8 percent of adults (1.9 million), followed by credit institutions at 4 percent (984,000), microfinance deposit-taking institutions at 3 percent (738,000) and other microfinance institutions at just 1 percent (246,000).

Among informal borrowers, saving groups were the largest source, ahead of family and friends. The survey classifies SACCOs as formal lenders — a reminder that, at least on paper, they sit inside the regulated system and owe their members the protections that implies.

The pressures behind all this borrowing are stark. FinScope estimates that 17.2 million adults spend more than they earn, relying on family, savings and credit to close the gap. Of the 12.5 million borrowers, about 11.6 million used at least one formal channel, while roughly 1.5 million borrowed informally — many people, it seems, use both.

On the savings side, the survey shows SACCO use tripling, from 5 percent of adults in 2018 to 15 percent in 2023. Mobile phone saving rose even faster, from 23 percent to 42 percent. Presenting the report in Kampala, Bobby Berkowitz, a senior analyst at FinMark Trust, noted that SACCOs and mobile money had recorded the biggest increases in adoption since 2018, even as informal mechanisms continue to dominate overall.

One troubling counter-trend stands out: the share of Ugandans keeping money at home more than doubled, which analysts read as a possible sign of weak confidence in financial providers, formal or informal. For SACCOs, whose entire model depends on trust, that is a warning as much as an opportunity.

Reasons for saving have shifted too. Thirty-nine percent of savers now put money aside for regular expenses. Saving for business rose from 9 to 12 percent and saving for agriculture from 8 to 12 percent, while saving for emergencies fell from 26 to 14 percent and saving to build or renovate a house dropped from 26 to 14 percent. Saving to buy household goods edged up from 1 to 3 percent. Overall formal inclusion rose to 81 percent from 77 percent in 2018.

Uganda still has a long way to go by regional standards. World Council of Credit Unions figures for 2022, cited alongside the FinScope findings, show Uganda with just over one million members in 896 affiliated credit unions, compared with 10.7 million members and about USD21.8b in assets in Kenya. Ethiopia and Rwanda follow with 6.1 million and 4.1 million members respectively. Across Africa, the same figures put combined SACCO membership above 43 million, with about USD24.5b in assets — a fraction of the USD2.5 trillion held by North American credit unions. Worldwide, the movement spans 98 countries, more than 400 million members and about USD3.6 trillion in assets.

The FinScope numbers suggest the gap is closing from below, driven by community and government-promoted SACCOs. The challenge is to ensure that growth in reach is matched by growth in governance, so that the 3.9 million Ugandans now borrowing through SACCOs are dealing with institutions that are licensed, audited and accountable to them.

If SACCOs can combine their trust advantage with the convenience members now expect from their phones, the next FinScope may show them pulling ahead rather than merely keeping pace.