Homegrown Initiative Changing Teachers’ Welfare
At a recent presidential press conference, President Paul Kagame explained to journalists that even if teachers’ salaries were more than doubled it could not guarantee their welfare. He said this would otherwise translate into significant budgetary increase that the country may fail sustain. The Daily Monitor newspaper of Uganda reported Thursday February 02 that the Teachers Union rejected the (Ugandan) Government’s offer of 15%, instead asking, emphatically, for 100 percent increase—which obviously may not be easy to sustain. Worldwide, the teaching profession attracts lesser (salary) pay. Teachers unions and other pressure groups usually push for increases which rarely happen or if it happens…never to their (teachers) satisfaction.
A visionary leader indeed, President Kagame back in 2006 initiated the idea of Umwalimu Sacco, a saving and credit Cooperative for all Rwandan teachers intended to uplift their socio-economic welfare to contribute to the development of the community they live in.
Through the cooperative, teachers would, out of their meager earnings save up to 5 per cent of their monthly net salary or a minimum of Rwf2, 000 per month for a period of six consecutive months. This would automatically qualify them to access loans from a revolving fund provided by the Government of Rwanda—depending on member (teacher)’s; financial capacity, employer’s guarantee or collateral provided. Teachers would then use Umwalimu Sacco loans to diversify into other trades or use (the loans) for personal development.
Moving on, and really fast, the Government provided all the support to get the initiative started and by February 2008 Umwalimu Sacco had obtained a license to operate as a financial institution, also fully recognized by the ministry of trade and industry (minicom) as a cooperative.
Straight away, Government provided space for offices and seed funding totaling to Rwf1billion. Continuously, the Government injects over Rwf500million annually to augment the revolving fund, which has accumulated to now over Rwf3.7 billion. Adding on teachers deposits, interest and commissions from loans and other transactions—all these form the cooperative sources of funds.
Now exactly four years down the lane, Hope Magazine discovers that Umwalimu Sacco is yet another successful homegrown initiative that could pass well for a perfect Model that other countries could soon visit to learn a lesson or two.
Umwalimu Sacco has established a strong system of control that ensures security of members’ savings. Through monthly savings, members can now pool savings to obtain loans for personal development. Umwalimu Sacco lending rate of 14 % is quite competitive compared to market rate of between 18-20 percent. According to the Managing Director, this interest rate could even be reduced if the institution continues to make profits.
Now, Umwalimu Sacco proudly operates a total of about 60, 000 active accounts for members of whom majority (over 90 per cent) are primary teachers, about nine percent are teachers (members) from secondary schools. Membership is also open to the Ministry of Education staff, who form about 1% of the total membership subscription.
In an exclusive interview with the Managing Director of Umwalimu Sacco Mr. Joseph Museruka, he said there’s tremendous growth by the cooperative over the last 2 years, and members are happy.
From a humble beginning, Umwalimu Sacco’s total outlay has grown to enable it raise its loan ceiling from rwf3million payable in 2 years to rwf15million payable in 5 years. One advantage the cooperative has is that its members (teachers) “are intelligent and disciplined financially,” remarked Mr. Museruka.
As of end of last year, member permanent savings grew to Rwf3.9billion compared to rwf2.5billion of 2010 and 1.8billion of 2009, indicated the cooperative’s financial statement of which Hope obtained a copy.
The Ministry of Education and National Bank of Rwanda (BNR) are taking keen interest in Umwalimu Sacco because of the positive socioeconomic impact the cooperative is creating on the economy. The Managing Director explained that teachers’ salaries now reach accounts faster due to improvements in the interbank funds transfer system by BNR where all transactions are now done online, instantly.
Quality Member Services
Various exciting initiatives are now being rolled out under Umwalimu Sacco to benefit members. For instance, in 2010, a funeral mutual fund was established where members voluntarily contribute only Rwf300 and in case of death, he/she or a spouse is supported with Rwf300, 000 and Rwf200, 000 if the deceased is a child. Mr. Museruka said 256 members have benefited from the funeral mutual fund to a tune of 63 million hence leaving the Cooperative with a reserve of 153million from the fund. ”The beneficiary just presents to the nearest Umwalimu Sacco branch office a death certificate of the deceased…” he explained.
The Cooperative has also established a Credit solidarity fund for all those loans that are below 5million, yielding 235million as reserves from the fund and yet another strategy of funds mobilization. Added the Managing Director.
Also, member teachers are now free to take overdrafts on their Umwalimu Sacco accounts at any branch any time during open hours. He said records show that over 40, 000 teachers who asked for loans received them.
Umurenge Sacco, a similar government programme that encourages Rwandans especially those at the grassroots to save so they can access loans from (programme) fund is now going to work closely with Umwalimu Sacco. Building on Umwalimu Sacco success, soon, teachers will be able to access their Umwalimu Sacco accounts from any Umurenge Sacco branch through the use of a modern technology software provided by the Elephant Business Group Ltd. This will make it more convenient for members. This way, teachers will be able to access their accounts information without making long distances.
Taking Umwalimu Sacco Closer to Members
Mr. Museruka explained that efforts are underway to ensure that Umwalimu Sacco services are taken closer to teachers across the country. In 2010, the cooperative had 16 branches and by the end of December 2011, BNR had authorized it to establish more other 4 branches in Nyamasheke, Gatsibo, Kirehe and Rutsiro districts bringing the total covered districts to 20. By March this year, he said the remaining 10 districts would have been covered too.
In the meantime, Umwalimu Sacco is using an innovative way of serving teachers in districts that are not yet covered. “We have established mobile counters in the remaining 10 districts where by our staff go with laptops and modems (for internet access), escorted by armed police to serve teachers. This is of course short-term. We shall soon have branches across all districts”. In a bid to ensure more efficient execution of member services, he said Umwalimu Sacco province offices will soon be established to decentralize operations of the cooperative. This is expected to improve Umwalimu Sacco services in districts.
In June 2011, a total of 300 Umwalimu Sacco members (teachers), ten from each district benefited training on saving. Additionally, teachers have been trained in management of cooperatives. Mr. Museruka said during trainings members had the opportunity to network and also share working experiences.
“Soon, all our members will benefit affordable solar energy loans and laptop loans too. That way, we will be contributing to building ICT Knowledge and environmental protection,” he added.
Teachers Mortgage Loans
A deal has been struck between Umwalimu Sacco and Development Bank of Rwanda (BRD) where there will be heavy investment in the construction of affordable low cost houses of between 4 to 10million to benefit teachers (members). Loan repayment period will be between 10-15 years.
Real Success Stories
First of all, end of 2011, Umwalimu Sacco reported net profit of Rwf650million which is 915% growth compared to just Rwf64million net profit made in 2010. In 2009, Mr. Museruka said the cooperative made a loss of Rwf454million. Average monthly permanent savings from about 60,000 teachers is Rwf140million; bringing the figure to Rwf1.5billion total teacher savings a year. “Between 2008 and 2011, Umwalimu Sacco disbursed loans to members totaling Rwf18billion, excluding soft credit facilities like overdrafts”.
According to the Umwalimu Sacco loan portfolio, most loans disbursed to teachers go into construction sector. Usually, teachers prefer putting up decent shelters for themselves before they embark on venturing into other trades. Many others, like one Mbabazi Olivier of in Kabarore, Gatsibo District and Odette Mukamukiza of Remera, Kicukiro District obtain loans to rehabilitate their houses. Some teachers invest in agriculture and animal husbandry. E.g. Teacher Mugabo Willison bought a Frisian cow, he now milks at least 10 litres everyday which he sells to supplement his teaching salary.
Umwalimu Sacco has encouraged teachers to form cooperatives and associations to lower their borrowing risk to enable them access higher loans to invest in big ventures. They have been encouraged to do this through what the Umwalimu Sacco Managing Director termed: School Centre. A case in Point, Mr. Museruka illustrates, is Koperative Isonga za Kamonyi (KISKA) of Teachers of Groupe Scolaire Runda in Kamonyi District, composed of 20 members (teachers).
The cooperative was loaned (leased) a commercial lorry worth 25million. With the lorry, the cooperative makes over 1million a month, average. “We have analyzed KISKA and we see they are able to pay back the loan in just 2 and half years”. Sush cooperatives have been established in the districts Nyarugure and Karongi and we strongly encourage teachers to create income generating cooperatives since the results show that such arrangement helps teachers to earn substantial side income. Many other cooperatives are benefiting bigger amounts of loans to invest in similar or other ventures. Others like Teacher Mukahabagusenga Jeannette obtain loans to buy motorcycles which she gave to the husband to operate as taxis to supplement domestic income.
Asked whether empowering teachers economically at this supersonic rate may not divert their attention away to compromise the teaching profession in the country. “I don’t think so. First, most teachers are passionate about their profession. In fact empowering them economically makes them concentrate better on teaching. Besides, much as they invest in other ventures, they’re usually not directly involving in running the side businesses themselves. Well, even if they finally all leave the profession, I don’t mind as long as they’re contributing to national socioeconomic development in other ways”.
Indeed, the sky is the limit for Umwalimu Sacco. Clearly, the cooperative is headed for big and bigger things. More important, teachers are now happier. They now have a sustainable solution to their low pay. Umwalimu Sacco plans to build its own home. It envisages growing into a fully fledged financial institution… who knows, one day we may witness a Teachers Bank in Rwanda.
Beneficiaries Speak Out
Mrs. Rwimo Domitille, a teacher by profession graduated with a diploma (in education) way back in 1998. She is one of the beneficiaries of Umwalimu Sacco who has obtained soft loans. She has juggled the loans plus other side incomes to construct a house in Kanombe worth over Rwf40million that she lets out and earns Rwf200, 000 per month. “I have taught for many years, but I could literally do nothing out the meager teaching salary. It used to be hand-to-mouth year in year out. It is the passion for teaching that keeps most teachers in the profession…but not the income.
When this opportunity of Umwalimu Sacco emerged, I first obtained a loan of Rwf2million which I fully paid back. I then secured more; over Rwf3million which I have to pay back in 5 years”. Mrs. Rwimo is determined to clear up the (loan amount) before expiry of the payment period of 5 years. She has other sources of income which she juggled so well to supplement the loan to build the Rwf40million plus house.
This is quite amazing, and certainly involves a lot of financial discipline. Her secret, she says, is the discipline of saving and being economical. “I urge teachers to save through Sacco. The benefits are immense. They should all come to my house and witness for themselves”, she encouraged.
“I have now grown old and weaker…how I wish Umwalimu Sacco came a lot earlier when I was stronger and younger. I could venture into more trades,” she said. She urges fellow teachers not to fear risks of taking up loans. Teachers are not born to be poor. We can also be as rich as other professionals. I am a true witness to this. Thanks Umwalimu Sacco, and thanks to my Government for the support”.
Mrs. Christine Mukamukuku too is a teacher in Gasabo and has been in the profession since 1982. She is one of the early adaptors of Umwalimu Sacco in 2008. She narrates that the first benefit was a salary advance of Rwf250, 000. “I later took soft loans of Rwf1.5million, Rwf3million which I fully paid back.
Now I took Rwf5million payable in 5years but I want to clear it up in two years,” she proudly narrates. She pays back Rwf119, 000 per month but she now earns much more than that. Christine is a mother of 5 children and she now can afford paying for their school fees. As she gets Umwalimu Sacco loans, she ventures into varied trades like mini grocery and commercial farming-growing vegetables and maize on large scale. This never compromises with her teaching profession because the husband is in charge of all the businesses. Like Mrs. Rwimo, Christine too urges teachers to work hard and not to fear taking up Umwalimu Sacco loans for personal development. “I now have much more pride in teaching. The amount teaching salary is now less important to me,” happy Christine said.
