Mbarara, Uganda: Informal community uses collective savings to deal with Covid-19

Mbarara, Uganda: Informal community uses collective savings to deal with Covid-19

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Story detail:
Date: 6th April 2021
Author: CDKN Global
Type: Feature
Countries: Africa, Uganda

The slum dwellers in Mbarara city, Uganda are using collective savings to deal with the global pandemic and invest in new businesses. Sarah Nandudu reports. This is the 40th story from the Voices from the Frontline series by ICCCAD and CDKN.

Mbarara city, located in south western Uganda, is the main municipality of Mbarara district and it is the largest urban centre in western Uganda. The city is densely populated with a low- and medium-income population. Just like other developing towns, Mbarara is experiencing a rapid growth of slums for example: Biafra, Kiyanja, Kirehe, Kijungu, and others. People living in slums are mainly day labourers and small scale business-holders.

Slum dwellers are generally excluded from formal financial markets and are often forced to borrow money from money lenders who charge extremely high interest rates — creating a vicious cycle of debt and ever-deepening poverty.  Slum Dwellers International facilitates the economic empowerment of urban poor communities through direct support to local affiliates, such as the National Slum Dwellers Federation of Uganda (NSDFU) and their support NGO  ACTogether Uganda.

The Federation is a network of community savings groups that practice daily saving, while using their collective strength to improve the lives of urbanites who reside in six of Uganda's growing municipalities - Kampala, Jinja, Mbale, Mbarara, Kabale and Arua. Members save at least 100 shillings per day via this group and they loan to members, generally with interest but no collateral. These loans are usually for household and livelihood needs such as school fees, health care, and small business support. Such collective savings have helped the slum dwellers many times in upgrading their communities and have also come handy during the global pandemic.

Impacts of Covid-19 on slum dwellers of Mbarara

Katongole Deus is a boda boda (traditional African motorcycle taxi) rider who lives in Mbarara city. Deus has a family, a beautiful wife and one little boy of 7 years. He is a member of Abamwe group, one of the slum dwellers federation groups mapped in Kakiika, Rwemiyeje cell within Mbarara Municipality.

"I have been in the transport business for three consecutive years and like any other person I have been strongly affected by the Covid-19 pandemic. The transport sector was, among other sectors, locked down, as boda bodaswere deemed to be  risky operations that can easily transmit the virus. The announcement  of the ban on carrying  passengers definitely and automatically disrupted everything,” Deus says.

Although boda boda drivers were allowed to carry luggage, this alone was not sufficient to earn income that could sustain Deus’s standards of living and that of other family members, since the biggest percentage of his  income comes from carrying passengers.

“Before coronavirus, I used to earn 30,000 shillings (8.2 USD) per day. Of that, 10,000 shillings was for my boss, 12,000 shillings for family activities and the rest was saved for school fees and other financial goals. I had great ambitions of buying my own motorcycle but unfortunately the process was disrupted and my ambitions received a great setback,” he laments.

Ibrahim is a market vendor with five children and two wives. He has a stall of shoes (both second hand and new ones), which he initiated long ago with a capital of approximately 500,000 shillings (US$137). Ibrahim is also a saver in a family support initiative, which is one of the groups that are registered with the federation located in Kiyanja slum.

“Before this period I was earning an average profit of 70,000 shillings (US$19) on a weekly basis. However, these profits multiplied during the festive season, when demand for shoes is high. My target for a long time has been stretching my profits to approximately 100,000 shillings per week and this is something that I have relentlessly been working on through saving and injecting more money in my business,” Ibrahim shares.

But Covid-19 has seriously blocked all Ibrahim's income-generating plans. Market places where he operated were closed due to the lockdown instituted by the government, which has persisted for months. The lockdown forced all businesses to close and only market places were left for food vendors and this has greatly impacted his social-economic life. His daily meals were also reduced to one meal a day and basic services were barely met.

Using collective savings to tackle the crisis

To sustain life during the lock-down, both Deus and Ibrahim had to revert back to their savings groups. They had to channel the savings that were meant for future goals to the day-to-day demands of their families. But eventually they hope to use the savings in future endeavors as well.

In order to be financially stable in the face of future disasters, Deus is planning to start up a business for his wife (grocery) after the pandemic and boost family income. The pandemic has taught him a lesson to not depend on one business.

The lockdown has further forced Ibrahim to use the savings that he had put aside as a way of mitigating the effects of this pandemic. He wanted to start a merchandise shop using the savings but now, due to lack of capital, he has to suspend this intention.

But he is now exploring bricklaying as a new opportunity where he can generate some income. One of his friends has provided some space for starting the new project. This is a project that he hopes will complement his other business that has been constrained by the pandemic. He also hopes that it will help in multiplying his savings if the situation is settled.

“The saving is another discipline that we will reinforce, it has evidently illustrated its purpose during such times, and we will definitely carry on this with the federation and also encourage other people to join federation schemes” they conclude.

Interviewer’s perspective

The Covid-19 pandemic has created a disproportionate impact on the people living in slums around the world as they already lack access to basic services. Volatile livelihood options and limited income have been further challenged and tested by the Covid-imposed lockdown. While they lack access to formal banking services, community-based savings groups have been the only resort for them to rely on. Though people like Deus and Ibrahim can meet their basic needs with the savings, and plan for investing on new endeavors based on their savings, such initiatives may not be sustainable due to lack of funds. Governments as well as non-governmental organisations should consider the plight of the urban poor differently and should invest more on providing financial security to them. Provision of formal banking services with subsidised interest rates can be one of the ways of dealing with the problem.

About the interviewer

Sarah Nandudu is the national coordinator of the National Slum Dwellers Federation of Uganda. She is the Vice Chairperson of the movement and monitors the consolidation of plans and budgets from communities as well as the implementation of all Federation programmes across Uganda.

About the interviewees

Katongole Deus is a boda boda rider who lives in Mbarara city. He is a member of Abamwe group, one of the slum dwellers federation groups mapped in Kakiika, Rwemiyeje cell within Mbarara Municipality.

Ibrahim is a market vendor with five children and two wives. He is a member of a family support initiative which is one of the groups that are registered with the federation located in Kiyanja slum.    

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