By HOMELAND MEDIA TEAM
The Micro Finance Center is once again under the spotlight over its failure to account for billions of shillings.
The audit queries raised by the Auditor General, John Muwanga in the 2022 report pin the John Peter Mujuni-led institution, the country’s basket fund agency for start-up capital, over failure to satisfy the AG on how they used money appropriated to them.
Micro Finance Center is the Government Institution mandated to extend micro–credit funds to qualifying Ugandans with a focus on agriculture and the active poor. The institution also offers development services to build capacity in enterprise and financial management.
In an audit report to parliament, the Auditor General, among other things wondered why billions of money were also written off as loans from potential clients who had refused to pay without following procedure.
Mr Muwanga was also concerned about why face Saccos were offered Ugx 7 billion under the Emyooga program.
The audit which covers a period between 2020 and 2021 indicates that out of the Ugx 402.617 billion given to the institution to carry out a number of activities, only Ugx 370.683 billion was spent and “MSC failed to absorb funds to a tune of UGX.31.934bn representing 7.93% of the realized funds limiting the service delivery.”
The chief government auditor indicated that “An audit of expenditure revealed that MSC effected reallocations on the budget line items worth UGX.1,015,000,000 from the departments of Finance, Administration and Human Resources, affecting the implementation of the planned outputs of the institution.” Reads part of the report.
A review of the company’s loan portfolio revealed that a total of UGX.126.37 billion relating to conventional lending was outstanding in loans and advances as of 30th June 2021. The portfolio had grown from UGX.75.14 Bn in 2019 by UGX.57 billion over the three years to UGX.126.37 Billion, locking funds to other befitting clients.
“During FY 2020/21, the MSCL Board approved the write-off of 167 loans amounting to UGX.4,682,672,669 without following the Public Finance Management Act 2015, which requires approval by the Parliament on write off above 10 million.” The report further reads.
The total loans written-off (incl. Principal, interest and charges/penalties) amounted to UGX.27,515,715,35. The Auditor General noted that Financial Years 2020/21 (20.7%), 2014/15(37.9%) and 2012/13 (19.1%) accounted for the highest proportion of loan write-offs attributed when compared to the total loan amount disbursed over since 2005.
Also, the institution also suffered under absorption of emyooga funds. Out of the receipts of UGX.337.72Bn, a total of UGX.304.3 Bn (90%) was spent and/or disbursed by the entity, leaving a balance of UGX.33.3bn (24%) limiting the service delivery. Also, many of the emyooga Saccos were operating without valid licenses.
“Over 6,326 EMYOOGA SACCOs validated and financed through Microfinance Support Centre by June 2021 were in operation without acquiring a license to operate from the Uganda Microfinance Regulatory Authority.” The AG noted.
The institution has also been accused of disbursing funds worth UGX.7.750Bn to 252 unregistered SACCOs as of 31st March 2021, exposing public resources to the risk of loss. This is a dent to Mr Joseph Tukamushaba, the head of business technology at MSC, that he didn’t do due diligence to guide the institution on how best to deploy its resources.
Out of the funds that were disbursed as grants to various constituencies SACCOS, UGX. 34,716,666,049 remained un-accessed by the beneficiary SACCOS as at 30th June 2021, rendering the transferred fund idle.
“Physical inspections in Kayunga District revealed that a total of UGX.500,000,000 disbursed by various SACCOs was never supported by loan agreements. There was no evidence to support the existence of the borrowing by associations, and beneficiaries could not be traced hence misappropriation.” AG Muwanga noted.
He also added that; “a total of 140 associations that had accessed loans worth UGX.3.52bn, from the Apex Constituency SACCOs, had defaulted in payment of UGX.2.49bn by the time of verification, representing 70.74% default rate.”
The Institution also did not have a strategic plan aligned to NDPIII contrary to Section 13(6) of the PFMA, which requires that the annual budget shall be consistent with the National Development Plan, the Charter of Fiscal Responsibility (CFR) and the Budget Framework Paper (BFP). In addition, the strategic objectives outlined in the strategic plan were not specific and measurable, limiting performance assessment.
This website labored to reach MSC communications officer Ms Phiona Muhebwa on her known telephone number for clarification but she didn’t answer our calls.
The MSC is one of the institution receiving most funds from government given its central role in uplifting ordinary Ugandans from poverty, and creating wealth.
A total of sh72.7 billion was allocated to MSC in 2022/23 financial year to give low cost credit to Saccos. Parliament also gave the agency an extra sh35 billion to give out grants to start-ups and struggling Saccos, on top of another Ugx100 billion towards emyooga program, to continue giving out funds to Saccos especially in urban areas, coming to a total of Ugx207.7 billion.
However, the agency keeps getting from scandal after another given raising concerns over its management’s capacity to ensure good governance and executing its core mandate.
This is not the first time MSC is under scrutiny over inappropriateness. For instance, in 2020, over 40,000 farmers nationwide and the agency locked horns over delays to release funds. It left many people puzzled about the priorities of the agency.