RCs monitoring loans to fake groups not a cure but can help

By Guardian Correspondent , The Guardian
Published at 11:18 AM Apr 17 2024

AS SURPRISING directive was lately issued in the National Assembly when the minister responsible for Regional Administration and Local Governments in the President's Office (PO-RALG), demanded that heads of regional secretariats not to tolerate approval of loans to fictitious special groups. It was a reference to the way in which the ten percent district council revenues accounts have been run, and now RCs, rather than DCs as would otherwise be the case. It is easy to see that this remark will soon be forgotten, while on DCs it would have been taken as a weighty directive, whereas it is not meant to be restrictive.

There wasn’t much elaboration on what is expected on disability, youth and women loans, if any unremitted payments are still expected to be collected, but the minister’s remarks resolved the matter. It isn’t that the groups have not paid up but there is hardly any groups to be pursued, or just a few, as the rest were fictitious. That means the money has been distributed to aid family businesses of those well-connected o to the council or district administration. It is largely an illustration of the reasons, less palatable, for local popularity of elected officials.

The issue of loans for special groups has rocked the government for a while, since decision was torn between accountability – chiefly in relation to eligibility and repayment – and evident clashes with its popular use, as a mobilisation tool. Unavoidably it is the latter aspect which won, and the president allowed the restoration of the ‘get to know you’ loan facility, and despite its blemishes, it helps foster unity at local government level, and solidarity at the national level. That way we can expect more of the same, but there can be some improvements.

One reason for expecting that this will be the case is that RCs are likely to have been instructed to take a closer look, which means that the loanable groups may have to be approved at the regional level, even if they are prepared at the district level. This may help to check some allocation abuses although it may not have the capacity to monitor the use of loans thereafter, in which case there will be an improvement in allocation, which also implies an improvement in the rate of repayment. It isn’t an issue of being held accountable but improved procedure.

One problem with allocating such loans is the usual maxim of how loans given to those who have a viable basis – like relatives of council members = have greater chance of repaying. In that case it is a paradox that extending loans to ghost special groups for women or youth and they have some back up uplifts economic activity in those places. Loaning to those living below the poverty line risks to be unworkable since they definitely would do with a TASAF sort of cash hand-out that has no obligation to be repaid. They are needy, not efficient.

At the same time, the ministry has selected ten district councils for testing a new model of issuing the loans that will be conducted through commercial banks. It is one thing that commercial banks will be holding the money as a correction for eligibility for loans and provision of identity, and it is another issue if the banks would be issuing loans, backed up by council funds in a guarantee role. That way the cash would be rapid and become a revolving fund, but the stakeholders are not gunning for this, as council leaders want to decide who gets loans, while there is a clamour around them that the loans be directed to the really needy.