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Will automation address Sacco challenges?

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NEW TIMES 26 FEB 2020

As the automation of Umurenge Savings and Credit Cooperatives (SACCOs) rolls out, questions have emerged on whether it is the much-sought solution to the challenges affecting the institutions.

The automation, which began in January this year, has been often cited as a solution to major challenges that have been affecting the sector which as of 2018 had seen a loss of Rwf10 billion.

However, the expected impact of the automation has been challenged with questions on whether it will address deep underlying issues among Saccos such as poor corporate governance and management issues.

At the Central Bank’s presentation of the Monetary Policy and Financial Stability Statement on Tuesday, February, Auditor General Obadiah Biraro, questioned the feasibility of the automation in addressing governance issues.

Biraro termed the automation as ‘an attempt to automate what we have failed to do manually’ adding that it was a dangerous trait.

Much as the automation is likely to increase efficiency, it might not be the solution to pressing challenges of governance and management which have threatened to run down operations.

During the 2018 National Dialogue Council, it emerged that Rwf10 billion had been lost from Saccos due to mismanagement, misappropriation, defaulting on loans among other reasons.

A task force was set up consisting of the Ministries of Finance, Trade, Justice and Local Governments and law enforcement authorities.

Rwf5 billion has since been recovered. 

While automation is a step forward, it might not be the ultimate solution to the challenge.

Southern Province Governor Emmanuel Gasana said that from observation and interactions with Saccos and their clients, there are gaps in capacity gaps which require intervention from various stakeholders including local governments and the Central Bank.

Gasana said that it is not uncommon to come across instances of misappropriation of finances or loss of finances, as well as mismanagement, which he said, requires a review of management and governance structures and capacities.

Central Bank Governor, John Rwangombwa, said that while there might exist challenges, they hope that automation of Saccos will put necessary safeguard measures that was previously not possible through manual paperwork hence losses.

Rwangombwa said that the automation which was in its pilot phase would among other things see reduced losses of funds through theft.

Deputy Governor Monique Nsanzabaganwa noted that cooperatives are an important facet of the financial services contributing to national goals and objectives such as poverty reduction, creation of employment, access to capital and can be threatened by bad governance practices or poor management hence the need to curb the vice.

Director-General of Rwanda Cooperative Agency, Jean-Bosco Harelimana, defended the automation citing that the current set up of Saccos does not allow for ideal financial services and operations.

Harelimana told The New Times that all leaders of Saccos and cooperatives across the country have been trained on the basics of management including cash management, fund management, treasury among others.

He however noted that there was a gap on skills on how to organize operations and their financial services operations to operate like banks do.

Their expectations is that automation will solve this, allow for interoperability and the creation of a cooperative bank where a client of a Saccos in Gisenyi can make a deposit in Kigali.

The process to automate Saccos began in 2015 has been characterized by unending challenges and delays from inception to implementation.

In 2015, FinTech – a Kenyan firm, was contracted by the government to help automate Umurenge-SACCOs at the cost of $4.6 million (about Rwf4 billion).

The firm was contracted to develop ICT-based system in computers, train the staff to use it and then connect the system in the yet-to-be-established cooperative bank connecting all the SACCOs, according to the terms of reference.

However, the company was unable to deliver and their contract was terminated in 2018.

In March 2019, the government opened a process to hire another a firm to carry out the exercise upon which 19 firms expressed interest and eight firms were considered.

The tasks had been scheduled to commence in May 2019. However, according to the Central Bank, the approach was amended from buying a solution to developing a local relevant solution.

The initiative was led by the Ministry of Finance, Rwanda Information Society Authority (RISA) and Rwanda Cooperative Agency and involved developing a system that is relevant to the local context.

The pilot phase involves three SACCOs in different parts of the country; Rutunga in Gasabo District, Rubavu in Rubavu District and Kanombe in Kicukiro District. 

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