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Lessons on financing self-supply in Uganda

posted 16 Mar 2012, 03:22 by RCN Uganda

Financing is one of the four (4) pillars of self supply. The proliferation of micro finance initiatives in Uganda provides opportunity for investment in self supply. With the presence of microfinance services (SACCOs & MFIs) in all districts and in almost all the sub counties, households have opportunity to access these services. However, the current challenge is the relatively high interest rates that Micro Finance institutions charge on loans. With interest rates of upto 4% per month, many households in rural areas are not able to access these loans. Making these loans attractive would require;

1. Linking Self Supply to Production

This entails promoting investment in self supply at household or community level for both domestic & agricultural production water needs. For households/communities involved in agricultural production investment in self supply provides opportunity for increasing household incomes through increasing production beyond the ‘traditional seasons’ as well as combating drought associated with changes in weather conditions. The availability of NAADS funding at sub county level, also provides opportunity for investment in self supply as an option for contributing to increased production.

2. Developing a recognized Public Private Partnership

The challenge of the high interest rates associated with Micro Finance institutions can be managed through development of a Public Private Partnership to promote investment in self supply. Lessons from an initiative implemented by Crestank in partnership with Centenary Bank, FINCA, and SACCOs in Kampala, Mityana, and Mubende showed that development of appropriate loan products with Micro finance institutions was necessary to promote investment in rainwater harvesting tanks. At least 130 households in Mityana, Mubende, Kabale, and Kampala were able to access loans to procure tanks after Crestank developed MoUs with Micro Finance institutions to provide tanks at  15% discount of the cost while the institutions received 3% of the cost of tanks sold.

In 2001, the government of Uganda established the Micro finance Support Center (MSC) to provide technical support to Micro finance institutions. The center is also active in lending active Micro finance institutions in the country and has a range of loan products for environmentally friendly initiatives such as investment in solar energy, biogas and rain water harvesting. Given its role in the Micro finance industry, the center is a viable partner that Ministry of Water & Environment can work with to develop a Public Private Partnership to support investment in self supply. The challenge for MWE is to lobby the MSC to develop a loan product for self supply that can be accessed by Micro finance institutions at a subsidized rate. The partnership would also require bringing on board selected NGOs, or district local governments to provide technical support and create demand among target communities through social marketing. For this partnership to work, it’s pertinent that an analysis of the full costs required to invest in PPP is done with breakdown of software (capacity building & communication), Hardware/Investment, & maintenance costs.

Key Action Points

  • Develop guidelines for district local governments on the link between self supply & agricultural production to tap into NAADS funding
  • Develop a framework with roles and responsibilities of partners for a typical Public Private Partnership for investment in Self Supply.
  • Analyze the full costs required to invest in the public Private Partnership with breakdown of software (capacity building & communication), Hard ware/Investment, & maintenance costs

By Peter Magara, National Learning Facilitator, Triple-S Uganda