LSC: S2 Legal Forms of Business Ownership

Introduction
In this chapter, you will explore the possible forms of business ownership that entrepreneurs can participate in. You will learn about business formalization in Uganda.
After deciding on the form of business ownership to engage in ,entrepreneurs must formalize it by registering it with the Uganda
Registration Services Bureau (URSB). This will make it recognized and eligible to enjoy benefits from the government like allowing it to
hire skilled workers. In addition, you will get introduced to cooperatives and how they
operate in Uganda as well as the Savings and Credit Cooperative Societies (SACCOs) and their benefits. Through this, you will be able to compare the forms of business ownership and select a suitable one.

Forms of Business Ownership

In your community, you have observed people running businesses as individuals commonly known as one man’s business. In other instances, you have observed or heard of people putting together money to start up a business so that they will operate a joint venture. How businesses start and are owned explains and defines business ownership. There are different forms of business ownership:
Sole proprietorship
Partnership
Limited companies
Public corporations
Cooperatives

Researching about forms of business in Uganda

In your group, with guidance from your teacher, VISI
business community in the school neighbourhood and:

1. Find out how the selected businesses are owned.
2. Find out how the businesses obtained capital to start.
3. Write a report about your findings and present it to the class.

Sole proprietorship

That shop from which you buy sugar and other groceries daily is under sole proprietorship. That shop is likely to have been started, is owned and managed by one person. If that is the case, then the owner is a
sole proprietor.

Characteristics of sole proprietorship

Understanding the sole proprietorship form of business

In your group,
1. Study Figure 1.3 carefully and share what you
understand from it.
2 Discuss the meaning of sole proprietorship.
3 Using the flow chart in Figure 1.2, discuss the
4 characteristics of sole proprietorship.
Present your findings to the class.

Advantages and disadvantages of sole proprietors Operating a business as an individual is very common, especially for micro and small businesses. This practice brings good outcomes. However, it has many notable challenges as well. Before any entrepreneur chooses to work alone, he/she must make an analysis to determine whether his/her business will thrive best that way.

Identifying the advantages and disadvantages of sole proprietorship

Regina dropped out of school in Senior Three due to early teenage pregnancy. She worked as a marketing agent for a cosmetics company for three years and when she accumulated some money, she went back to her parents’ home. With her little savings, she decided to rear local chickens. She raised
the capital alone and is managing her poultry business solely.

Tasks

1. What form of business ownership is Regina operating?
   2 Discuss the advantages and disadvantages of such business ownership.
   3 Do a write-up and present it to class.

Partnership business

Most times, two heads are better than one discussed the challenges of starting and operating a business as an individual, for instance, difficulty in raising capital, and unlimited liability of the owner among others. The alternative, therefore, is to pool resources (capital) to start up a business as co-owners and later share the profits got from business. This is referred to as a partnership.

Characteristics of a partnership
Characteristics of a partnership business are the unique features that distinguish it from other forms of business ownership. Study Table 1.1
below.

Analysing characteristics of partnership business

In your group,
1.Use the available school resources to research about
the characteristics of a partnership business displayed in
Table 1.1 above.
2 Share your findings with other groups.

Advantages and disadvantages of a partnership business
When individuals combine their skills and resources to start up, operate and sustain a joint business venture, they enjoy several benefits, like sharing losses and skills. However, they, too, encounter challenges like mistrust and mismanagement of funds.

Assessing the advantages and disadvantages of a partnership business

In your group, read the passage below carefully and do the
tasks that follow:
Solving a problem of food shortages in Kyamukoona Secondary School Kyamukoona Secondary School was facing a problem of food shortages. This was because the school relied on only one supplier, Mr Mebane, who later failed to supply. The school administration gave the contract to other business people:
Mbundu, Mbeguya and Kateete. They chose not to operate their businesses separately as individuals but combined them to form a joint business.

They believed that running a joint business would help them meet the demand for food by their customers. They met, set rules and regulations to govern them, signed an agreement
and started doing the business of food supply together. Since then, there has not been any food shortage in Kyamukoona Secondary School. This is because the business people raised enough funds together and they helped one another in their operations.

Tasks
1.What is the collective term that you can give the four individuals: Mebane, Mbundu, Mbeguya and Kateete?
2 What are the advantages of Mebane, Mbundu, Mbeguya
and Kateete operating business as business partners?
3 Discuss the disadvantages faced by Mebane, Mbundu, Mbeguya and Kateete in running theirpartnership business.
4 Do a write-up and present it to the class.

Types of partnership business
Partnership businesses are divided into different types.

Explaining the types of partnership

1.Read the write-up below on the types of business partnerships.
2 Select one as guided by your teacher and research more on it.
3 Present it to the class.

Permanent partnership: It is an agreement between two or more people to do a certain business for profit for a lifetime.

Temporary partnership: It is an agreement between two or more people to do a certain business for profit within a specific agreed upon time. When the time expires, the partnership automatically comes to an end.

Limited partnership: In limited partnership, some or all except one
partner have a limited liability to the extent of capital contributed by them.

Ordinary partnership: Partners in an ordinary partnership have unlimited personal liability as between themselves and third parties.

Note: When a partner dies, becomes insane or becomes bankrupt, the partnership can be terminated. Additionally, at the expiry of the agreed period of partnership, it can be terminated.

Formation of a partnership
Before partners start their business, they find it important to have a written agreement. This written agreement among business partners is known as a partnership deed.

Discussing the components of a partnership deed

In your group,
I. Discuss the following components of a partnership deed:
a) The name of the physical location of the partnership.
b) The name, address and occupation of a partner.
c) The type of a partner in the partnership.
d) The capital contributed by a partner.
e) The ratio in which profits and losses are to be
shared among partners.
f) The duration of the partnership.
g) The method of selling disputes among partners.
2 Summarize them and present to the class.

Debating sole proprietorship and partnership business

Form two groups, one opposing and the other proposing, and debate the motion: “Sole proprietorship is better than partnership business” Choose a chairperson, secretary and timekeeper. After the debate, make a fair judgement on the motion.

Limited/Joint stock companies

Sometimes in an association, people come together and carry out functions with an aim of making profits. This results into the formation of limited companies. These individuals contribute capital in the form of shares and are then registered as shareholders. The shareholders share profits amongst themselves in proportion to the number of shares contributed by each and every person. In this regard, therefore, a limited company is a corporate association of people who have agreed to come and work together to perform a specific function with the aim of making profits.

Identifying a joint stock/limited company

1. With the support of your teacher, visit a nearby trading
   centre and identify any joint stock/limited company.
2. Find out its features. Note down your findings.
3. Compare your findings with the characteristics of joint
   stock/limited companies displayed below:
   Independent legal entities.
   Business capital is divided into units called shares.
   Unlimited continuity.
   Divided sharing.
   Limited liability.
   Decisions are made by a number of people.
   Voluntary formation.
   Shareholders own the business. Types of limited/joint stock companies

Public limited companies and Private limited companies

Private limited company
This is a company with membership ranging from 2—50 members which, by its articles, restricts the right to transfer shares of the company, i.e. a person cannot freely sell off his shares as he may wish like a public company but must seek the consent of the directors of the company.
Public limited company
This is a type of business where the public is invited to contribute capital to the business in order to have a large volume of business. There is a minimum of 7 members and there is no maximum limit.

Researching about characteristics of private limited comanpany

In your group,
1. Use the available school resources to find out the features
of:
a) public limited companies.
b) private limited companies.
2 Discuss the advantages and disadvantages of joint stock
companies.
3 Do a write-up and present it to the class.

Public corporations

Understanding the concept of public corporations

In your group, study the picture below carefully and share what you observe from it. Do the tasks that follow:

Tasks
1.,Carry out research using the resources available to find out the meaning of public corporations.
2 Identify and write down a list of government companies known to you.
3 Explain the ways in which those identified companies benefit the community.
4 Do a write-up and present it to the class.

1.1.5 Cooperatives
Community members with the same interests and who need to support one another through doing joint projects can come together and contribute resources like money, land even labour to start a business
which generates profits. The profits can be shared or reinvested in the business so that it expands.
Such arrangements are used by people who live in the same locality and share interests to support one another through working as a group and raising resources as a group to invest in single projects
like growing maize, keeping goats, saving and lending to themselves among others. Such a form of business is what we call a cooperative.

Describing Cooperatives

In your group,
1. Study Figure 1.6 carefully and list down what you have
identified.
2 Discuss the characteristics of cooperatives above.
3 Share with other groups in the class.

Formalising a Business

UGANDA REGISTRATION SERVICES

Reflective questions
1.Do you know any business that is legally registered in your community?
2 What do you think is the process one goes through to register a business?
3 What do you think are the benefits of a formalized business?
4 Find out more information on a formalized business from available resources.

When an entrepreneur starts up a business, he or she is required by law to register it to make it legally recognized and thereby operate successfully without any interference. Registration in Uganda is done by
Uganda Registration Services Bureau. Without registration, a business faces many problems that will be discussed later. Registration is done with the Registrar of Companies through filling in the registration form.

The process and benefits of a formalized business

Registering a business goes through a number of steps as you are going to find out and once this is done, it benefits the entrepreneur in a number of ways.

Listening to a guest speaker about business registration

Write a group report summarizing the guest speaker’s presentation and present it to the class.

Business registration process

Business registration is not such a complicated process if one commits to formalizing the business. Registration can be done physically or online from the comfort of one’s home. In this case, entrepreneurs fill in the registration form.

Registering a business

In your group, do the following task. You are required to present your work to the class.
Task: Uganda produces many animal products including animal skins and hides, among others.”
Assuming that your group wants to use these abundant resources to start a leather tanning industry in Namanve, the new industrial zone in Uganda; apply to Uganda Registration
Services Bureau for registration. (You could use the form given below or create your own form according to your own style).

Benefits of registering a business
When an entrepreneur registers his or her business, there are a number of benefits he or she enjoys that include getting tax benefits from the government, easy acquisition of funding for the business, saving business name by acquiring a trade name, and making it easy for an entrepreneur to access a loan, among others.

Understanding the benefits of registering a business

In your group, read the passage below carefully and do the task follow: that follows
Kapwepwe Primary School
For the last seven years Mr and Mrs Kapwepwe have been running a primary school as their family business in Kalifuwa village. Parents had been taking their children to this school because it was near many families. They took good care of them pupils.

One day, one of the children left home for school but did not reach school. The child decided to spend that day with an old man in the community who used to give out sugarcane and
mangoes which he planted in his compound. Mr and Mrs Kapwepwe and the family of the child realized that
the child was missing and they reported the case to the police for investigation. The police asked Mr and Mrs Kapwepwe for the registration certificate of their school but they did not have
it since they had not registered their school. The police closed the school immediately and the parents
never brought their children back to the school. They lost trust in the school. The police later found the lost child.
Mr and Mrs Kapwepwe paid a fine of I-Jg. shs 5 million for operating the school illegally for seven years. They later registered the school and the police allowed them to operate again. Using the registration certificate, they are now able to get loans from banks and to get school supplies on credit. Their
•epuration in the community has increased and they now get government support in the form of textbooks, desks and chalk among others.

TASK

1 From the passage given and the introductory text on the benefits of registering a business, discuss and suggest other benefits of formalizing (registering) a business.

2. What are the dangers of doing business without formalizing or registering it?
3. Do a write-up and share it with other groups.

Requirements to register a business

There are about five major requirements anyone should have to register and start a formal business in Uganda:

Other forms

1. Statement of nominal share capital of the company.
2. Declaration of compliance with the requirements of the Company’s Act (Articles of Association).
3. A prospectus is required if it is to be registered as a public limited company.

Activity 1.16
Researching for information about the requirements
to register a business In your group, use the internet and library to research and find out more about the above requirements and documents, and present to the class.

Sample certificate of registration

Starting a formal business Activity 1.17
Mr Asidri wants to borrow money from Stanbic Bank to recapitalize his business of making liquid soap so that he can also start producing face masks due to the increased market for face masks. However, his business is not registered, and the bank cannot trust him with the money.
Task
Help Mr Asidiri to understand the documents that he will need to legalize his business to have access to the loan from the bank.

1.23 Indicators of a formalized business To show that a business is formalized, it should have a certificate of incorporation in the case of a public limited company or a trading certificate in the case of a public limited company. A registered business, in general, should, therefore, possess the following:

1 A certificate of incorporation/trading license
2 Specialist ion and division of labour
3 Rules and regulations
4 Defined systems, policies and procedures
5 Defined inter-relationships
6 Others: TIN, NSSF number

Researching and discussing the indicators of activity 1.18
formalized business
In your group, use the internet and library to research and discuss the indicators of a formalized business listed above. Find out what is involved in each. Present to the class.

Steps in registering a business

In registering a business in Uganda, entrepreneurs get registration services from four official bodies. These include Uganda Registration Services Bureau (URSB), Uganda Revenue Authority (URA), municipality or city council authorities for entrepreneurs operating in the city and the National Social Security Fund (NSSF). Each entity has a user-friendly website listing services offered and related fees.
If you are to register a business, there are specific steps that you should follow

1 Searching for a business name.
2 Reserving a business name.
3 Obtaining a certificate of incorporation.
4 Obtaining an investment license.
5 Obtaining a taxpayer’s identification number (TIN).
6 Obtaining a trading licensee
7 Registering with the National Social Security Fund (NSSF).

Below is a detailed summary of the official steps that entrepreneurs wishing to incorporate and register new firms in Uganda have to go through. Search for the business name: Search to verify that your proposed company name does not belong to anyone else. An online name search option is available on the URSB website. Reserve the business name: Upon completion of the search for the business name in the registry database and on passing the similarity, defensive, offensive and desirability test, the business
name is then reserved. Obtain certificate of incorporation: This is still done through Uganda Registration Service Bureau and the requirements are company books, memorandum of association. articles of association,
declaration of companies using forms A1 , A2, A3, 7 and A9 plus the company resolutions. Obtain an investment license: This is done by Uganda Investment Authority to approve operation of the investment. Obtain a taxpayer identification number (TIN): This is done through URA. An application for the TIN can be online through www.

ura.go.ug and, additionally, personal inquiry forms for each director of the business are required.
Obtain a trading license from the municipal authorities where the company is located. Various businesses are located in different areas and, likewise, they are supposed to register with the respective municipal authorities. For example, those in Kampala register With Kampala City Council Authority.
Register with the National Social Security Fund (NSSF): Many employers tend to ignore this step, yet, it is vital, especially if the company employs more than 5 people. It is obliged to pay the NSSF
fee of 10% of their salaries through their various social security accounts.

Demonstrating steps followed in registering activity 1.19 business
In two groups, role-play the steps followed in registering a named business of your choice.

Limitations of formalizing a business

Are you aware that many entrepreneurs are operating non-formalized businesses? In this Section, you are going to find out the limitations to business registration.

‘ Finding out the limitations of formalizing a business
In your group, the teacher has invited an entrepreneur from your community. Find out from him/her:
2.
(a) What limits entrepreneurs from formalizing their businesses.
(b) What measures have been put in place to encourage businesses to register.
Do a write-up and present it to the class.

Deregistration refers to the process of applying to a company registry to close your company/business. It removes your obligations and status as a company/business officeholder. You must pay an outstanding fee before you can apply for deregistration.

:activity 1.21 Finding out the conditions for deregistering a business In your group,

1. Use the internet, magazines and library to find out the conditions under which a business may be deregistered.
2. Do a write-up and present it to the class.

b) That the company has no assets, or because of the inadequacy of its assets, that there is no reasonable
probability of the close corporation being liquidated (attach proof).

c) The letter must be signed by at least 50% of the active directors of the company or members of the close corporation or by the third party who is requesting deregistration.

d) The taxpayer identification number (TIN). This is intended to verify that the company fulfilled all its tax
obligations.

Prepare supporting information/documentation to be attached to the letter.
a) A tax clearance certificate or confirmation of no tax liability outstanding.

b) A certified ID copy of any person signing the letter wherein deregistration is requested.

c) If a third party is applying for deregistration, documentary proof must be submitted confirming the
statements in la) and 1b) above.

Scan and e-mail. A full finalization of deregistration is dependent on a statutory advertisement process which is
3 months. After completion of the deregistering process, the final deregistration notice will be posted to the person requesting deregistration.

Applying for deregistration of a business
activity 1.22 In your group, fill in the following application for deregistering a business and hand in your work to the teacher for assessment:

Re-registering a business requires going through all the steps Of registering a business as earlier presented. The following form is used to apply for re-registration of a business. You are encouraged to fill in the form with the guidance of your teacher

Illustrating a re-registration form Activity 1.23 In your group,
1. Study the re-registration form provided above.
2 Discuss all its features to the class. Note down the discussion points.
3 Use the internet or school library to get another format of the re-registration form and design one.
4 Present your work to the class.

Cooperatives in Uganda

neme: Business Management
Producing a product that other community members also produce can be a bad idea. But when people in the community, for example coffee farmers, milk producers among others, come together to produce as
a group, it is more beneficial since it enables them to improve on the quality of the products, get access to markets, among others. A cooperative business is owned and controlled by people who use its
products, supply them and produce them.

.1
Meaning and history of cooperatives in Uganda

Some of you, especially those who live in rural settings, have heard of agro-cooperatives like coffee cooperatives, milk suppliers’ cooperatives, and others. In these cooperatives are producers and suppliers of similar products that come together to easily market their products and sensitize themselves, besides engaging in many other objectives Of cooperatives. These group members always have the same goal to
achieve.

Cooperatives, therefore, are people centered-enterprises owned, controlled and run by members with the aim of making profits and improving their social and economic wellbeing. Cooperatives bring
people together in a democratic and equal way. Cooperatives are democratically managed by the “one member, one vote” rule, whether the members are the customers, employees, users or residents. Members share equal voting rights regardless of the amount of capital they put into enterprise.
Cooperatives in Uganda have a history. They have evolved and they are still evolving. Their history has been shaped by political and socioeconomic transformation.

activity 1.24
Explaining the timeline of cooperatives in Uganda In your group,

1. Read and discuss the write-up on the history of
   cooperatives in Uganda you have just read.
2. Summarise it in table form and present to the class.

1.3.2 Principles and benefits of cooperatives
Like in a school setting where rules and regulations are clearly stated, there are rules and regulations that govern activities and smooth running of cooperatives. These are summarized into principles of
cooperatives. Once cooperatives are in place, members and the community at large benefit from them.

Elaborating the principles of cooperatives
The principles of cooperatives have been provided in Table 1
below for you. In your group,

1. Carry out research using, among others, the internet,
   business textbooks, business journals, local government officials in charge of registering cooperatives and consultants in cooperatives, and explain each of the principles provided in the table.
2. Present your findings to the class.

Benefits of cooperatives
The benefits of cooperatives are the positive outcomes that a group of people enjoy when they work together to improve on their welfare and promote their interests through producing products or marketing products produced by other businesses.

Studying the figure and identifying the benefits of a cooperative business to the members and the community

1. Study Figure 1.15 carefully and answer the questions
   that follow it:

fIgure
2 Discuss the benefits of the cooperative to the people in Amuru district.
3 Write a report and present the findings to the class

103.3 Types of cooperatives
Cooperatives are of various types, ranging from those that produce, market
and manufacture to those that deal with saving and lending to members

Researching about types of cooperatives
Activity 1.27 In your group,
1. Carry out research (on the internet, using commerce textbooks/business studies and even consulting
resourceful people, among others) to get an explanation of the types of cooperatives given in Table 1.4 below.
2 For each given type of cooperative, suggest any three unique advantages it contributes to the wellbeing of the community.
3 Cite any one example of each type of cooperative from your own home district or region.
4 Present your findings in Table 1.4 below.
5 Share your findings with other groups.

13.4 Steps in forming a cooperative
When you want to start a cooperative, you must follow a systematic
process which is determined by the government.

ctivity 1.28
cooperative
In your group,

1. Read the following steps in the formation of a cooperative. After reading, you will dramatize or act them out to class. Before dramatizing them, make sure that you do enough practice to make it more enjoyable while acting).

Step
Evaluating the cooperative
Activities involve
Each cooperative must have a reporting system which ensures timely production of accurate periodical operating and financial reports. Such reports can be used in the regular and effective
supervision, monitoring and evaluation of the cooperative’s performance.

Challenges of cooperatives and their solutions

Cooperative societies have a range of challenges. Some are due to poor management by the leaders. Some are due to limited market for their products, low value addition and misuse of resources.

Examining the challenges of cooperatives in Uganda
Ictivity 1.29 2.
In groups discuss,
i) challenges that cooperatives face.
ii) measures adopted to control the challenges identified.
Present your findings to the class.

The Savings Credit And Cooperative
Societies (SACCOs)

114.1 Understanding financial cooperatives
SACCO is an abbreviation for Savings And Credit Cooperative Organization. SACCOs in the local communities are owned and controlled by members who have the same or common interests. They are legal bodies registered under the Uganda Cooperative Law of 1991 and the Cooperative Societies Regulations of 1992. SACCOs are economic institutions doing business in order to grow, survive and become sustainable. The minimum number of members required to register a SACCO under the current law is 30 people.

1.4.2 How SACCOs operate
SACCOs are legal entities that are registered under the Uganda Cooperative Statute of 1991 and Cooperative Societies Regulations of 1992. They are financial institutions that encourage the spirit of
saving and help people start up self-help projects from the loans advanced at a relatively lower interest rate. SACCOs are democratic organizations where decisions are democratically made. Members elect board and committee members that carry out the day-to-day activities of the SACCO Board members are between 9—15. Among the committees is a carries Out internal audit Of the SACCO

SACCO membership is open to all who belong to the group regardless of religion, race and gender or job status. Additionally, members agree to save their money together and offer loans to each other at a fair rate of interest. Interest is charged on loans, to cover the interest cost on savings and the cost of
administration. SACCOs hold an annual general meeting within which members are informed about the performance and financial status of the
SACCO. Members share dividends as agreed and passed in the annual general meeting at the end of the year, at a fixed rate, depending on the shares held.
In summary, SACCOs operate according to the following procedure:
Step 1, subscribe and become a member: Purchase shares, pay the one-time entrance fee and make a minimum deposit.
step 2, start saving: The money you keep in the SACCO goes owards your collateral. For example, if you have saved Sh100,000, you would be eligible for a loan of Sh200,000.

Step 3, apply for a loan: You will need to fill out the application form and submit your business plan which the loan committee will review and approve. Provide proof of collateral.

Step 4, receive your loan: Three months after you Sign up, you are eligible to receive a loan valued at twice your savings to start or expand a business in line with the SACCO goals.
Step 5, begin repayment: Your accountant will help you to calculate your repayment schedule. On-time repayment is important as there is a late fee charged on past due payments.

activity 1.30
Forming SACCOs as a class Organize yourselves in four groups. Each group should form a SACCO and start saving. Keep on monitoring your SACCOs we will keep on referring to these SACCOs as we continue
studying).

1.403 Benefits of SACCOs
SACCOs directly and indirectly benefit members and communities where they operate from. For this reason, they are largely encouraged and supported by the government. SACCOs promote a saving culture, especially among low-income earners. They offer advice on investment to members as they acquire loans. They also offer financial support in the form of loans to financially constrained members, to mention but a few. In the next Activity, you are going to understand and find out more
benefits of SACCOs.

Analysing how SACCOs work and their benefits activity 1.31
In your group, read the following case study and perform the tasks that follow: A successful SACCO in Ankole region In 2005, the Government of Uganda introduced the Prosperity for All Programme, otherwise known as Bonabagaggawale. One of its objectives was to increase access to finance
through the promotion of Savings And Credit Cooperative Organizations (SACCOs), especially in rural areas which were less served by commercial banks.

Theme Business Manageme Although the new policy of increasing access to finance has
faced significant challenges in many parts of the country, it has been successful in Western Uganda, particularly in Ankole region, with over 300 vibrant SACCOs. Unlike other regions of Uganda, SACCOs in Ankole region have witnessed tremendous growth and now rival commercial
banks in customer base and loan values. SACCOs in western Uganda have played and continue to play
a big role in the lives of ordinary people through innovative products that include school fees loans, small agricultural loans, construction of water tanks and boda boda loans.Furthermore, SACCOs in Ankole region have not only helped to fight household poverty but have also greatly supported
small and medium size businesses in the region by enabling greater access to credit compared to commercial banks. About a dozen of these financial institutions have grown significantly over the past decade that they can favourably compete with commercial banks in terms of customer base as
well as their capacity to meet customers’ needs, such as being able to offer big loans of up to Ug. shs 50 million. Besides meeting customers’ needs, the emerging financial institutions are major drivers of job creation in the region by especially empowering property-less young people to access
collateral-free credit for them to start businesses by simply using their membership and peer pressure to borrow and service loans from the financial institutions. Source: The Sunrise, published on June 24, 2017
Tasks
I. What are the benefits of SACCOS to the people in Ankole region?

2. Discuss other benefits of SACCOS as researched using the internet and library information sources.
3. Note down your findings and share with other groups.

1.4.4 Challenges faced by SACCOs and possible solutions in Uganda
SACCOs in Uganda face a number of challenges that have led to
failure of some of them:
Limited financial resources: Most SACCOs have limited funds. This limits them from carrying out their activities like holding empowerment workshops for smooth running of the SACCO,

Lack of common interests among members: There is a challenge
for the SACCOs that have membership with different occupations. It
happens that members of certain occupations deserve more priority/
rights to services than others.
Weak leadership: SACCO leaders have inadequate leadership skills
to provide direction and effective management of the SACCOs, which
leads to poor performance.
Poor accounting system and record-keeping: Record-keeping is still a
big challenge amongst SACCOs. Keeping up-to-date records and making
timely, correct and complete records has made accountability difficult.

Poor communication channels to members: SACCO leaders provide limited information to the members due to lack of transparency. This makes it difficult for the SACCO members to be informed adequately and in a timely manner on issues concerning their association and how it operates.

Failure to recover loans: The SACCO credit committee members in most cases are not very effective in collecting those loans that are overdue. This may be due to a number of reasons such as inadequate funds to follow up the members with loans.

Inadequate education and training programme for SACCO members: SACCOs have inadequate funds to train their members in financial management and how SACCOs operate. Misuse of funds in SACCOs: SACCO leaders tend to be corrupt and embezzle SACCO funds for their selfish interests. This affects the
growth of the SACCOs.

Solutions to the challenges faced by SACCOs Different measures have been devised by SACCOs and the government to reduce or solve challenges they face.

Identifying the solutions to challenges faced DY Activity 1.32
financial co-operatives
In your group,
1 Interact with the SACCO members of your school teaching and non-teaching staff and find out the solutions they have devised to solve SACCO challenges.
2 Hold a discussion in your group and find out more solutions to SACCO challenges. (You may use the
internet and school library).
3 Use ICT tools such as a recorder, PowerPoint, smartphone, cameras and projectors, among others, to
prepare and present your findings to the whole class.

Sample Activity of Integration
Context
Mariam, Ruth, Denis, Isaac, Caroline, Martin and Ezra are residents of Nankulabye in Kampala. They are friends and are all interested in starting a printery business. However, they are still divided on how to operate their business. Ruth thinks that each one of them should work as an individual while Martin thinks they should pair themselves. Caroline and Ezra think that all of them should start one joint business. They have agreed to put together money and run a joint business. However, they have been advised to register their printery business upon starting to avoid facing forced closure by authorities like KCCA.

Mariam and Ruth are members of Abundant Harvest village SACCO and plan to contribute capital from their SACCO. It is still tough for the rest to get their starting capital contributions.

Task
Design a flyer guiding Mariam and her friends on the steps they
will follow to avoid facing forced closure.

Chapter Summary
In this chapter, you have learnt about: the legal forms of business ownership.
the types of limited companies. the characteristics, advantages and disadvantages of each form of
business ownership. the process and benefits of a formalized business. the requirements to registrar a business in the business community. the indicators of a formalized business. the correct steps in registering a business.

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the limitations of formalising a business.
the process of deregistering a business.
the process of re-registering a business.
the meaning and history of cooperatives in Uganda.
the principles and benefits of cooperatives.
the types of cooperatives in Uganda.
the process of forming a cooperative.
financial cooperatives (saccos).
how saccos operate.
the benefits of saccos.
challenges faced by saccos in Uganda and identifying possible
solutions to the challenges.