Since inception, UMWALIMU SACCO has contributed to improving the Rwandan teacher’s welfare
Conceived in 2006 under the auspices of President Paul Kagame of Rwanda and licensed in 2008 as a financial institution by the National Bank of Rwanda, Umwalimu SACCO a teachers savings and credit cooperative has in the last six years of its operation significantly improved the social wellbeing of Rwandan teachers.
Establishing a SACCO, which idea was a brainchild of President Kagame endeavored to achieve as its main outcomes; improving teachers’ welfare and ensuring that the resulting economic development is sharedt at this ecoonomic dan teachers and ensuring that this is done without necessarily calling for abnormaed not just e th amongst them.
The idea was then constructed further and all legal paperwork developed getting the SACCO, the first of its kind, operational.
And another testimony of Rwanda’s approach to development, one that focuses on home grown initiatives to solve challenges in a manner best appreciated and understood by the people was hatched.
The SACCO has since built and strengthened the social concept of unity and solidarity; which has been key in the country’s rise from the ashes of the 1994 genocide perpetrated against the Tutsi’s by an extremist government of the time.
By easing access to finance, Umwalimu SACCO has significantly improved the welfare of teachers
Starting with about 2,500 teachers whose salaries were being paid through it, the numbers have since increased to over 46,000 active accounts by end year 2013 and.
This is out of an estimated 62,000 teachers in public schools whose salaries ought to be channeled through Umwalimu SACCO.
However, the teachers’ cooperative boasts over 75,000 members, including teachers in both private and public schools, and other employees of the Ministry of Education.
In an exclusive interview with Umwalimu SACCO’s Managing Director Mr. Joseph Museruka, he shares his joy for the work well done in the past half decade.
Since 2008 when the SACCO begun taking savings and offering credit, it has recorded an ever growing loan portfolio with more teachers acquiring low interest credit rate to finance their projects and consequently that of their areas of residence.
This has been bankrolled on an aggressive expansion plan which has seen the number of branches increase from just 11 which were operation till 2012 to 30 as of current, ensuring that there is at least one office in every district.
Also to further ensure that Umwalimu SACCO offers proximal services to its beneficiaries, the cooperative has since last year entered into a partnership with over 416 Umurenge Savings and Credit Cooperatives, through which every teacher can now access services at the sector level.295 of these sector based cooperatives are already operating and serving teachers across the country.
Most of the loans find their way to public schools whose teachers are most affected by low wages, and are offered at an interest rate unprecedented in contemporary Rwanda’s financial sector.
To facilitate this approach to the alleviation of poverty among Rwandan teachers, the government of Rwanda has since the cooperative’s establishment channeled funds every other financial year, so that low cost financing is made available to as many teachers as can be reached.
Until end year 2014, the government had extended over Frw12 billion. Part of this is included in a line of financing approved by the Rwandan cabinet in 2012, which will see Frw30 billion given to the cooperative over a five year period.
The credits are offered at an annual interest rate of 11%, compared to prevailing rates with traditional lenders which are often between 18% and 21% for commercial banks while the rates escalate to over 24% in other microfinance institutions.
This high cost of collateral based finance in the traditional financial sector was significantly restraining for teachers to access loans, hence the more reason for founding Umwalimu SACCO.
Another achievement to be proud of is that the rate of non performance of loans has been kept low over the past five years. Museruka shared that as at 31st December 2014, this parameter was recorded at a low 4.15%.
Besides the healthy financial indicators in Umwalimu SACCO’s books of accounts, the impacts the access to finance it brought on board has had in improving the socioeconomic wellbeing cannot be overemphasized.
For instance of the over 44,000 teachers who have benefited from various credit products offered over the five year period, 25,000 have been able to construct or renovate and improve their houses.
Another 18,000 of these teachers have directed the acquired loans into income generating activities; creating additional sources of income to the same end of improving their standards of living.
Notwithstanding the additional sources of income created, teachers’ projects especially in Rwanda’s rural districts have been instrumental in sparking off economic development in numerous villages, creating jobs for thousands more and in so doing improving not only their own lives but also of their families.
According to an impact assessment survey commissioned by Umwalimu SACCO and conducted by a private firm at the end of 2014, members who reported to have created jobs from the financing received represented 47.9% and 54.6% of these were in the agriculture sector.
That sounds very synonymous to the very basic understanding of the role of a teacher in community, one that involves an individual passing on knowledge to many others for the benefit of present and future generations and acting as the starting point for civilization.
With their conventional role in constructing nations by ensuring a steady supply of able men and women reinforced with the current impact of sparking off social and economic development through job creation, there is little that Rwandan teachers may, if at all, lack to qualify for a hero’s celebration.
“We proudly speak of the achievements of the SACCO in the last six years of existence and not just because of the healthy performance as a financial institution but because of the real lives that our services have touched and thank the Rwandan government under President Kagame’s leadership for this visionary approach to solving the needs of teachers,” Museruka shared.
According to the aforementioned impact assessment report carried out on a sample of 1080 teachers, “majority of the respondents (60%) asserted that Umwalimu SACCO has enabled them cope with emergency situations. In this instance, it helps them afford the purchase of food as their highest expenditure (30.8%) pay school fees (23.9%) and other requirements which also account for 5.3% of expenditures of teachers” the report reads in part.
Also, operating enterprises increased household income as reported by 52.1% of respondents. 83% acknowledged an improvement in their living conditions especially habitat status, sanitation, food security, nutrition and access to electricity.
Financing Umwalimu SACCO
As a financial institution with a model of operation that requires offering low interest rate loans, Umwalimu SACCO does not stand a great deal of competitive advantage with traditional bankers for most of the finances available on international money markets.
However, notwithstanding this limitation, the institution makes relentless efforts to attract this kind of financing from various development partners like the Development Bank of Rwanda (BRD). From the latter, Umwalimu SACCO secured Frw1.5 billion loan at a 10% interest rate to finance mortgages for teachers that will paid over 15 years.
Through similar channels, the institution has acquired various lines of credit to increase loan offering to its members.
However like Mr. Museruka shared, there are two main contributors of finance to Umwalimu SACCO; the Rwandan government as indicated above and its now over 75,000 members as recorded at the end of the year 2014.
From its members, everyone is mandatorily required to save 5% of their monthly salary which is regarded a permanent saving while Frw10,000 is paid by every new member as share capital to the cooperative.
Through the monthly savings, Museruka shared that the SACCO collects Frw170 million every other month which adds up to over 2billion collected annually.
In order to mobilize more funds and offer a wider range of solutions for teachers, Umwalimu SACCO has created several products unprecedented in traditional banking, like the Funeral Solidarity Fund.
Under this product, a member of Umwalimu SACCO who by default is a teacher or an employee of the Ministry of Education and thus an employee in the teaching profession, receives Frw300,000 or 200,000 (an approximate equivalent of US$428 or 285) in the event of loss of spouse or child respectively.
This lump sum is made possible through a monthly contribution of Frw300 made by each of Umwalimu SACCO’s over 75,000 members.
From its establishment, the Funeral Solidarity Fund had benefited 1177 at the end of 2014 with over Frw219 million has been disbursed.
This fund still had over Frw550 million at the end of last year.
Another such product is the Credit Solidarity Fund, which was introduced to benefit teachers who as a result of a wide range of challenges find themselves unable to meet their loan repayment obligations.
“This fund is for beneficiaries who consume loans of Frw2 million and less repayable in a period not more than two years. They contribute to the fund based on how much credit they have received, which fund in turn operates as a fallback support for the SACCO in the event that the debtor is unable to pay their loans as a result of a genuine misfortune like death.”
Since its creation, 138 cases have benefited from the Credit Solidarity Fund taking more than Frw74 million from the basket.
Just like the former, the Credit Solidarity Fund had over Frw1 billion in its coffers at the end of 2014.
A cooperative for and run by teachers
Umwalimu SACCO is not only an institution that has teachers as its beneficiaries but also is a financial organization owned and run by teachers.
Teachers form the body that oversees the institutions management both at the central and decentralized levels, making decisions that govern the day to day running of their SACCO.
At the decentralized level, in all 30 districts of Rwanda, the management of each Umwalimu SACCO branch is overseen by a group of teachers who form the Delegates Committee.
The committee constitutes of teachers, one representing each sector in the district. The representative of each sector is chosen after a process which begins when the teacher committees at the school level select one representative at the Umwalimu SACCO board of management at the cell level.
At the cell, another vote is cast to establish the teacher representative of a sector who now goes on to join others selected from each sector in the district, forming the Delegates Committee that operates as the Board of Directors for each of Umwalimu SACCO’s 30 branches.
A total of 416 teachers, each representing a sector then form the overall body that oversees Umwalimu SACCO’s activities; the General Delegates Assembly.
For accountability and transparency, a five teacher team is voted and these form the Board of Directors while three more are selected to constitute Umwalimu SACCO’s supervisory council which promotes equity among members and builds trust for the institution’s services.
To ensure that the structure remains impenetrable to people outside the teaching profession, Museruka says, the number one prerequisite for anyone to be a board member is to be an active teacher.
“It is very strict in that even when a member leaves the teaching profession or retires, they are automatically disqualified from the board and any other body of management and elections are carried out to replace the vacancy.”
The various teacher committees and the Board of Directors are vested with all the power to make decisions and orient Umwalimu SACCO, a factor that ensures that there is no straying away from the institutions vision.
For instance Museruka offers, “in case my bosses (teachers) felt unsatisfied with my duties today, they are at liberty to immediately sack me and instate someone else whom they may find best suited for the job”.
The journey travelled so far by Umwalimu SACCO and Rwanda’s teachers, according to its Managing Director, is nothing but a statement of gratitude by the people and government of Rwanda, for the heroism with which teachers serve the country and a sign of appreciation for the role that their profession has played in Rwanda’s post genocide recovery and continued social and economic recovery.
But like Museruka shares, the journey travelled so far is not one without flaw, many challenges remain unsolved and aspirations unmet but that this cannot take away the bliss in the achievements made to date.
“There is still a lot to be done especially in ensuring that every Rwandan teacher establishes an income generating activity.”
To the letter, Museruka and his team of bankers at Umwalimu SACCO have a target of seeing 90% of teachers own income generating activities by the year 2017.
From the cooperative’s loan book, he shares that 61% of all money given out is still outstanding loans most of which was borrowed by teachers to invest it in income generating activities.
Overarching challenges
As indicated by the impact assessment report, one of the main challenges of improving the living standards of teachers was the Teachers’ households’ size and big number of teachers married at young age that increase rate of concentration of portfolio on overdrafts and treasury for purchasing food and financing education of children. It was observed that 43.5% of the married members were within the 25- 35 age group with average household size of 5 children aged below 13 years.
As a result, there is an increase rate of concentration of credit portfolio on overdrafts for purchasing food and financing education of children thus limiting engagement in income generating activities.
To address this challenge and other lingering bottlenecks, Umwalimu SACCO in partnership with local government institutions especially districts plans on investing in capacity building programs for teachers in order to increase their financial literacy, entrepreneurship skills and knowhow of planning income generating projects, in addition to mobilizing teachers to employ family planning techniques in order to keep their families in manageable sizes.
In this regard, teachers will be sensitized to request for income generating loans and forming profit oriented cooperatives in their respective school centres. The strategies are geared towards ensuring that eventually, every Rwandan teacher has a source of additional income soon.
