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Changing lives: A water users' loan scheme in Lira, Northern Uganda

Published on: 05/03/2012

Water users in Lira district, Northern Uganda have adopted a new way of ensuring regular payment of user fees and continued functionality of their sources. From the funds collected in monthly fees, they have started a loan scheme for users. Many community members who have benefited from the arrangement testify that their lives have changed tremendously.

Moses Odoo is a happy man. In a matter of months his bricklaying project has grown by leaps and bounds, thanks to a UGX50,000 (US$20) loan he took from the Water User Committee (WUC) of Omito deep borehole. At the time of taking the loan, Odoo was faced with a crisis. The casual labourers he had employed to help him with the bricks were threatening to lay down their tools over non-payment. This would have resulted into unimaginable losses for him. He quickly appealed to the WUC, who accepted his application for a loan, to be paid with a ten percent interest per month. He paid the labourers, sold the bricks, paid back the loan and reinvested the profit. “I will be getting at least a million shillings by end of February (2012),” says a beaming Odoo.  

Odoo is a user at Omito Borehole in Awire Alem village, Boroboro East, Adekwokok sub-county, Lira district. The borehole, constructed by All Nations Care in 2010 serves at least 150 households each of which pays a monthly user fee of UGX500 (US$0.2). It is from these monthly collections that the Water User Committee, in August 2011, started soft advancing loans to community members. This system of borrowing, locally referred to as “Bol Icap” is fast taking root in Lira district and changing the lives of many.   Bol Icap is Langi for “keep in a box for future use”. It is similar to the now widely known “Yehora Yeguza (YY)” strategy which started in Kamwenge district.

Where it all began

Although the WUC loan is an old practice in areas like Rwenzori region, for Lira it is known to have started in 2011. Few communities have so far taken up the strategy, including Omito deep borehole and Okello Amuku shallow well in Akolodong village, Lira sub-county.   For Omito borehole, the idea came from the village saving scheme to which many of the WUC executive members subscribe, while the WUC chairman of Okello Amuku got the tip from a church meeting and sold it to his fellow users.

No matter the origin, Bol Icap is a noble idea capable of causing social and economic emancipation. Borrowers have different pressing needs and it is especially gratifying to note that they have a ready place to run to for help.  Take for example Ida Akello, whose grandson was about to miss his O-level exams owing to the lack of money to clear school dues; or Florence Eyim who desperately needed money to clear the medical bills of her ailing brother. Both women managed to attend to these crises by taking loans from the water user collections at the Okello Amuku shallow well.

“I appreciate our source and our Water User Committee. I don’t know what would have become of my grandson if I had not borrowed the 70,000 shillings ($30). Although I have not yet cleared the loan, I am at peace because my grandson now has a secondary school certificate,” says Ida Akello. 

Apart from solving problems of a personal nature, Bol Icap is presenting many more advantages that probably nobody had ever expected.  Although this is a new practice in Lira district, it is already showing signs of changing the way users perceive the need to collect water user fees.  

Duka Peter, the WUC chairman of Omito borehole says: “Our members pay their fees promptly because they know what it means to be without water in the area. Before we got this borehole, we used to fetch water from unprotected sources in far away villages. The users therefore want this borehole to be functional all the time. Now that they know about Bol Icap, they are even more committed to pay their fees.”

In addition to bringing about better appreciation of water user fees, Bol Icap is making it possible for user committees to meet regularly. For the loan scheme to be a success, the WUC must be functional, as it must spearhead the collection of user fees. The WUC must also keep clear records and hold regular meetings to provide community members with feedback. All these eventually lead to enhanced WUC transparency and accountability and good source governance. Most importantly perhaps, Bol Icap shows the clear connection between functional water sources and other aspects of community and social development. The experiences of Odoo the bricklayer and that of Catherine Omara a millet trader, come to mind. Omara borrowed UGX50,000 ($20) and used it to start up a thriving business, trading in millet flour.

How it works

Whereas the underlying concept of Bol Icap is the same everywhere, the actual implementation differs from community to community. At the Okello Amuku well the process of borrowing starts with the prospective borrower informing the WUC chairperson, who then calls a committee meeting. On the two occasions that loans have been taken, the applications have been considered by only four members of the committee including the chairperson, the vice chairperson, the secretary and the treasurer. Chairman Isaac Okello explains that these are the four critical members on the committee of eight. And although loan is taken at 10% interest per month, the borrower does not necessarily have to put collateral security. Moreover, borrowing is not restricted to members only, lest would-be borrowers are put off. For now the committee remains open to borrowers who are not necessarily contributing community members.

At Omitto well the process is more stringent and the rules are written. When the committee receives and application, a meeting is called to discuss the merit of the application. A prospective borrower must be a permanent resident of the area. The borrower has to put some collateral, which could be a goat, a cock, or even a bicycle, depending on the amount required. So far they have not registered any defaulters but should there be one, the committee would sit and determine how to deal with the offender, working through the Local Council. For that reason, the chairman of the Local Council is kept in the know of all the borrowings made.

The major similarity between the two sources is that both WUCs remain mindful of the need to retain some money in their coffers in case they have an operation and maintenance issue to attend to. On how much a borrower can take, the Okello Amuku people say that they don’t have an upper limit but they are mindful of the need to retain cash in hand. On the other hand the Omito WUC loans do not exceed UGX50,000 ($20).

Key challenges

Although the Bol Icap idea is great and welcomed by community members, it is not without challenges. Firstly, there is the challenge with payment of user fees. Even after seeing the advantages of paying the fees, users still don’t want to take heed. The WUC executive and members still complain of many people who use the sources but do not pay use fees. Borrowers all made the same appeal: all community members should pay up their user fees if Bol Icap  is to be taken forward.  

In both Omitto and Okello Amuku cases, it was found that the funds collected were not put in the bank. The WUC treasurer keeps the money, which poses many risks.  Some members explained that they were afraid of having to pay bank charges while others said the banks were far away from the villages that they would have to spend so much money in transport, not to think of the long processes involved in depositing and withdrawing.

The other challenge is about the unwritten rules concerning the WUC loan scheme. Particularly in Okello Amuku case, the WUC has not yet drafted guidelines or even a constitution governing the borrowing and lending process. This is treading on slippery ground as either the WUC or the owners of the money (users) will soon commit an unacceptable but there will be no reference point to help with corrective measures.

Going forward

Wherever it has worked, community members are all for Bol Icap. Having tasted its advantages, Florence Eyim of Okello Amuku well says that all community members should try to take advantage of this opportunity. “If one has a burning problem and she is sure that she can pay back the money in the required time, there is nothing to stop her from appealing to the WUC for a loan,” she urges. Although her brother passed away, she believes that the loan she got helped to add some days onto his life.

Other members like Aida Akello whose grandson managed to complete his O-Levels, recommend that borrowers should be told the full implications of the interest 10 percent interest rate per month. Some also contend that three months repayment period is too long and should be reduced.

But looking at a more strategic and long term view, these community members need to expand the fund to be able to provide even bigger loans that people can invest in big income generating activities. While the Omito group was thinking of appealing to donors for additional funding, the Okello Amuku members were for setting up a joint project out of which they would generate more funds and keep expanding their financial base. Rose Omala, the Senior Community Development Officer, Lira District advised that the groups should formalise their existence and apply for grants under the Community Driven Development (CDD) initiative in the district local government.

Whatever the case, the success of Bol Icap largely depends on collection of user fees.  Obua Nelson assistant secretary of Omito WUC says that they should use one-on-one interactions to convince people to pay user fees. “The collection of fees will depend on us convincing the users that this is their source and not for the government or the NGO. You need to make people understand that this is their water and then they will pay up,” he advises.  

For the Omito borehole which attracts users from all neighbouring villages, the campaign has already started. Champions from Awire Alem village are now visiting other sources which have long-ceased to function, telling them about the good things that come out of paying water user fees, not least the constant availability of water plus of course access to soft loans.