By Credit Department Staff, ECLOF Uganda

Savings represent the accumulation of money or other assets. People often save by denying themselves things they really need. Such savings represent ‘hot’ money, because they have been generated through one’s own sweat and toil.
Loans represent ‘cold’ money and without a savings component can lead to a lower level of responsibility on the part of the borrower. Experience shows that the higher the proportion of ‘hot’ money in a credit system, the greater is the borrower’s sense of responsibility to repay.

Marginalised people will only save if they have confidence in the financial institution, receive interest on their savings, have ready access to their money, and can obtain a loan when they need one.

ECLOF Uganda encourages savings among its clients in order to increase their capacity for self-help and enhance their development. In addition, savings act as a guarantee for loans, and saving itself teaches people how to handle money.

ECLOF Uganda cannot legally act as a savings bank but may grant loans to groups which themselves run a savings system. Groups applying for an ECLOF Uganda loan must have savings of at least 10% of the amount of the loan requested, in addition to a group contribution, whether it be in cash or kind, of not less than 30% of the total project cost.
The major problem ECLOF Uganda faces with savings systems is that, because it does not run them, they are very difficult to monitor. Groups can manipulate figures in order to get the size of loan they want. Again, since ECLOF Uganda does not control the savings it is difficult to have access to them if loans are not repaid. Also, in some cases clients may borrow money and then disguise it as savings in order to get a further loan, which they then use to pay off the first loan.

ECLOF Uganda realises it has not done enough to encourage saving and so we plan to promote user-managed savings and credit groups. We also intend to create savings incentive schemes and provide education in order to promote the capacity and desire to save.