Zombo leaders moot plan to save teachers from high-interest money lenders

Zombo: Leaders in Zombo District have embarked on an initiative to establish a locally owned and robust Savings and Credit Cooperative Organization (SACCO) for teachers to shield them from the excessive interest rates imposed by financial money lenders.

These lenders, commonly referred to as “Now Now” lenders, have stringent repayment conditions that have driven many teachers into financial distress, leading to underperformance or even fleeing their homes due to mounting debt pressure.

Songa Biyika Lawrence, the Member of Parliament for Ora County, emphasized the urgent need for locally owned SACCOs to provide affordable financial solutions for teachers. He assured his full support for the initiative.

“We want teachers to have their own SACCOs. We don’t want them relying on commercial banks and financial money lenders who trap them in unsustainable debt. Instead, we aim to establish a strong SACCO where they can borrow money at lower interest rates,” Songa explained.

He further pledged his financial contribution, adding, “I have already made a pledge, and very soon, I will meet the teachers to discuss this initiative further.”

Uganda has seen significant growth in SACCOs, commercial banks, and financial money lenders, which serve as essential financial service providers.

However, in Zombo, over 20 financial money lenders operate across the district, offering quick loans with minimal bureaucracy. While this ease of access is appealing, their high-interest rates ranging from 10% to 30% per month have pushed many borrowers into financial ruin.

Many individuals, including teachers, have been forced to abandon their homes due to overwhelming debt.

The Ugandan government has taken steps to regulate money lenders and protect consumers. The Minister of Finance, Planning, and Economic Development capped the maximum interest rate at 2.8% per month (33.6% per annum) under the Legal Tier 4 Microfinance Institutions and Money Lenders Act, Cap. 61.

Despite these efforts, some unlicensed money lenders continue to exploit borrowers, often leading to the confiscation of valuable property.

Esther Afoyochan, the Zombo District Woman MP, pledged UGX 10 million to support the teachers’ SACCO. However, it remains unclear whether the funds have been received.

Speaking at a Catholic Women Association event in Paidha Catholic Parish, Afoyochan condemned the rampant confiscation of National Identity Cards by money lenders, who use them as collateral for loans.

Although Article 29(2)(c) of the Constitution and the Registration of Persons Act prohibit the unauthorized possession of National IDs, the practice continues unabated in Zombo.

Local residents react

Sunday Omirambe, an aspiring MP for Okoro County, acknowledged the appeal of money lenders, noting: “Many people prefer money lenders because they provide quick access to funds without the bureaucracy that banks require.”

He urged leaders to form an Alur SACCO to provide affordable alternatives.

Jerose Mandhawun, a resident of Zingili Cell, admitted: “We borrow from money lenders because they don’t delay giving us money, though their interest rates are high.”

Jane Piyic, a vendor at Paidha Main Market, criticized delays in government programs: “I registered for PDM (Parish Development Model) two years ago, but I haven’t received anything. I’d rather go to money lenders, who at least give me money quickly.”

Teachers struggling with debt

Silvio Jalar, the Zombo District Inspector of Schools, acknowledged that many teachers struggle with accumulated loans, which negatively impact their well-being and job performance.

“Many of our staff suffer from stress-related conditions, and some have even passed away due to the overwhelming pressure. Their salaries are meager compared to the high cost of living today,” Jalar stated.

While loans are intended to stimulate economic growth, excessively high interest rates can trap low-income earners in a cycle of debt, making it difficult for them to meet basic needs.

In response to the growing outcry against predatory lending, President Yoweri Museveni last year declared war on money lenders, vowing: “We will crush their operations.”

Under the Tier 4 Microfinance Institutions and Money Lenders Act, Cap. 61, the Uganda Microfinance Regulatory Authority has the mandate to enforce interest rate regulations and protect consumers from exploitation.

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