What Happens When You Default on a SACCO loan in Uganda (Know Your Rights)
Defaulting a loan is not a new thing, almost everyone has some sort of loan default although not at a higher amount, it could be from a friend, neighbour or any other person.
Most businesses or other planned ways we can hope for paying back the loan can meet unknown disasters which makes payment challenging. When dealing with SACCO loan default cases, mostly from up-coming SACCOs and some cities like Kampala, their fundamental principles that sometimes override the SACCO constitutional laws of recovering a loan from a SACCO member. These principles are brought by the desires and spirit of togetherness and growth for each community after suffering long severe economic problems. These principles sometimes give you some immediate solution before other SACCO constitutional laws are implemented. We can discuss them before we see SACCO penalties, SACCO rights and also your own rights when you default.
Four Principles Not Documented and Official on SACCOs You May Gain Relief From
1. No Collateral Nature of Up-Country SACCO Loans
Most SACCOs like Arupa SACCO Savings don't have a clause in their loan terms of getting a loan on collateral, which is a golden opportunity to safeguard immediate confiscation of your properties. Although the SACCO has a mandate to take your property, by law they cannot do that unless you show no any other means and option of clearing your loan. This is quite an opportunity to collect money from other sources. This principle gives time and safety of your property.
2. Earlier Records and Responsibilities
This covers only concerning personal representation. This morally stands as your earlier commitments on the group SACCO growth, this stands for and draws your importance in the founding body which automatically gives you respect and SACCO members may allow you some period to try find funds for repayments.
Also responsibilities earlier held in the SACCO such as chairperson, board members build strong connections between you and executives who can influence decision making in your favour, although not directly omitting off your debt but influencing decisions like extending payment deadlines which offer you favour in finding out solutions in the meantime.
3. Themepathy and Loan Collective Payment
Themepathy actually can mean mercifully handling your situation. It does not mean omitting out your loan but getting a solution by voluntary involvement of almost most of SACCO members who may accept to pull some small amount of money to cover up the specified amount you have defaulted.
4. Being Active and Searching for Funds
At a village level organised SACCO, a loan defaulter who portrays these factors can trigger SACCO members on their decision making to favour them because of their seriousness. It shows you are willing to clear the due payments but only you met some difficulties along the way. This all matters when you are buying time to cover loan payments but are not guaranteed and don't happen in all SACCOs because leaderships, administrations and all other operation techniques differ from each other.
Most of these principles we discussed are not official or acceptable in any form in a SACCO but always occur in individuals. Some have even enjoyed these privileges without knowing. Most are from the humanistic nature of togetherness.
Getting down to what happens when you default a loan in Uganda, let's start with SACCO penalties, SACCO rights and finally your own rights when you default.
1. SACCO Penalties
SACCO penalties are one of the exact sections from the constitution that are set and agreed upon by all SACCO members depending on many factors. Most SACCO penalties are set according to the location of the SACCO group, whether a city or up-country, levels of income of the community, and the reason for the SACCO formation. This enables favourable SACCO penalties to be set that meets the ability of its members to work accordingly.
Let's use SACCO penalties from OBAR SACCO in Soroti City as an example.
Rule No. 1
1. No Collateral Set
Collateral can only be confiscated from a loan defaulter if he/she has no other option of refunding the loan and can only be done in his/her presence by guidance from the area local chairperson (LC1).
2. In case there is a loan defaulter and the loan committee comes at your home to recover the loan, you must pay them all transport expenses and other costs of not less than UGX 50,000 and can go beyond if the distance is far and more costs are incurred during the recovery.
3. If you default a loan and fail to pay it back in a period of 2 weeks from the deadline, your loan limit will be reduced to half of what you first borrowed and failed to pay.
4. In case you disappear and run away at the time of loan repayment, the SACCO has a right to deduct all your savings and display your name in the press.
5. If a SACCO member consistently defaults every loan he/she applies for, the member will be banned from borrowing any amount of money from the SACCO for a period of 3 years and 4 months.
Those are some of SACCO penalties but some SACCOs have even more harsh penalties compared to others. All are set to meet the objective and purpose of it. We can now discuss the SACCO rights on defaulters.
SACCO Rights
Any agreed terms and conditions in a SACCO gives it full rights over handling a SACCO loan defaulter in Uganda, which also a SACCO has to make terms and conditions align with constitutional demands of Uganda on financial loans. These rights are put in place to handle members who borrow with ill intention or take any advantage of weakness in the system. These are some of SACCO rights.
(i) SACCO has a right to sell property of a loan defaulter using legal procedures stated in the SACCO agreed constitution and government of Uganda laws.
(ii) SACCO has a right to display irresponsible loan defaulters on the national press and expose them in order to save other financial organisations such as banks like Centenary Bank Uganda and VSLA groups.
(iii) SACCO has a right to assess and verify your identity and find out if you are trustworthy before offering a specified amount of money to a SACCO member. This controls impersonating other individuals in order to profit using their identity and records. The SACCO has the mandate to take you to courts of law.
3. Your Rights When You Default
When signing every SACCO constitution, your rights must be clearly stated although most SACCOs don't indicate rights of loan defaulters, but everyone must know his or her rights in this situation. Here are some of the SACCO rights one must know.
You have a right to assess the loan amount to make sure that your loan amount is not increased from SACCO record books.
You have a right to appeal and extend the loan deadline by using specific problems you met that hindered your repayment.
You have a right to choose property to be confiscated if a SACCO has not specified which collateral you have identified during the filling of loan forms.
No individual has to sell your property without your presence or break into your home, as this is the rule of most SACCOs and VSLA groups who don't have land titles or other documentation concerning the defaulter's loan property, as they don't require collaterals.
Conclusion
Defaulting a SACCO loan in Uganda is mostly handled by following SACCO set terms and conditions each SACCO agreed on, but knowing your rights as a defaulter helps you secure your property and belongings from being sold cheaply and gives you more knowledge on handling your loan payment.
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