Amid the pandemic, many people have taken out loans, using land as collateral. Unable to earn and pay their debts, some now face eviction.

Banana sellers en route the market in Uganda. Credit: Francesco Ungaro.

In March 2020, when Doreen Achiro, 41, was chased onto the streets by her husband following a domestic brawl, she decided to take her four children and leave him as soon as she could.

She began working odd jobs in people’s gardens and selling fruit at a local market to raise money. And when she found out her neighbour in Kinene village in northern Uganda was selling a one-acre plot of land, she jumped at the opportunity. She agreed to pay half the sum upfront and the rest in instalments over the course of a year.

Achiro and her four children moved into their new home and she began farming it. In May, she took out a loan of USh1.3 million ($367), using her land as collateral. The interest rate was 20% and the loan was to be paid in weekly sums across a year.

Achiro had managed to escape her domestic situation and stand on her own two feet, yet a year later, she is struggling. Uganda’s lockdown restrictions due to COVID-19 made it difficult for her to sell her goods. She still owes the microlender USh780,000 ($220), despite the loan payment terms expiring four months ago, and the interest continues to accrue. Moreover, Achiro wasn’t able to finish paying for the plot of land and her neighbour is threatening to evict her. 

“He told me that I failed to pay on time, saying that he had already sold the same land to someone else”, she says. “When I asked him to refund my money, he said ‘I don’t know what you are talking about’. I was tricked into buying air.” 

Achiro doesn’t have any documents that prove ownership and can barely read or write. She has tried to consult leaders in her village but says they won’t intervene because she doesn’t have any money to offer them. “I am struggling to feed my family, and what I cultivated on that land will be taken away,” she says. “It will all be for nothing.”

Achiro’s situation is far from unique. African Arguments heard from several people in rural communities who took out loans during the pandemic and lost their property when they defaulted.

When Sharon Ayaa, 37, lost her petrol station job amid a government lockdown in July 2020, the single mother of four took out a loan of USh3 million ($845) using her two-acre piece of land as collateral. 

“I used some of the money to stock food in our house,” she says. “I used some of it to pay up some hospital bills for my mother…and I used some to start up a business of selling cakes.”

This kept her going for a while, but when she missed some loan repayments, the lender seized her land. 

“They came to my house very early in the morning and told me that ‘your time is up,’” says Ayaa. “I was scared. At first, I told them to give me time to pay but the loan officer refused to listen. I was scared and I gave in.”

During the pandemic, stories like Achiro’s and Ayaa’s have become commonplace. In fact, in April 2020, the government temporarily halted all land transactions and evictions to stop unscrupulous individuals from taking advantage of the situation. The government also asked banks to relax loan repayments during the lockdown, and the Bank of Uganda implemented a credit relief scheme. 

However, many microfinance lenders ignored the government’s directive, according to Nwoya district chairperson Emmanuel Orach. He told African Arguments that he knows of around 30 locals in his area who say they were tricked into selling their land or who lost their land after defaulting on loans. 

“Many people survive on agriculture, and when they lose their land, the situation worsens,” he says. “What we have done so far is to meet officials from the 15 credit facilities and asked them to give more time to the people to pay their loans because of the pandemic. We are waiting to hear from them.”

The Uganda Microfinance Regulatory Authority (UMRA) recently began rolling out country-wide community outreach sessions to provide financial literacy training to people who might be particularly vulnerable to exploitation by lenders. It also says it is punishing credit facilities that have been demanding illegally high interest rates during the pandemic.

“We have a complaints handling mechanism which coordinates with local leaders at grassroots to handle cases of people who are being forced to pay money during this time,” says Edward Bindhe, UMRA communications officer. “After finding out that the complaints are genuine, we may fine or revoke the licenses of such institutions depending on the nature of the crime.”

Some lenders are following the government’s directive and trying to support their clients through this difficult period. For instance, Northern Uganda Women Development Fund says it has been meeting with loanees to help them plan rather than to demand payments. 

“We meet with our borrowers and look at the situation of their business and also make a projection of when they will be able to pay back without putting pressure on them during this time,” says Nancy Anena, a loans officer with the fund.

Certain other lenders, however, say this more patient approach isn’t viable. As loan payments have slowed during the pandemic, some financial institutions told African Arguments that they are struggling to stay in business. 

“We tried being patient in the first lockdown last year but it’s too much for us as well,” says one moneylender who asked to remain anonymous. “If we wait, what will our families eat?”

For people like Achiro and Ayaa, whose livelihoods are uncertain and whose homes have been swept from under them, this question is even more immediate. 

“I don’t know how I am going to survive,” says Achiro. ”My business is down and I am not sure when the government will lift the lockdown”.

This article is part of On Food Security & COVID19, a special series in partnership with OXFAM.