Caring for Orphans, Widows, and the Elderly (Cowe) had the appearance of a respectable non-profit organisation. They had nice offices (usually a good yardstick for corporate credibility in Uganda), were registered with the Uganda National NGO board and described themselves as a community membership organisation that would lift the vulnerable out of poverty.

They also claimed to be running a microfinance scheme that would pay good rates of interest to investors, despite not having a license from the central bank to take deposits from the public. The interest rates – a hefty 54% a month – should probably have sounded warning alarms. But people who invested 65,000 Ugandan shillings (£13) when they first opened received Shs 100,000 (£20) at the end of the month. Ugandans smelt an opportunity to make a quick buck, and when the first savers got the supernormal interest, a buzz of excitement was created.

The first beneficiaries persuaded friends and family members to join and everyone who could rushed to cash in. “People borrowed money even from banks in order to earn interest from Cowe,” says Leonard Kobusingye who worked for a bank in the western Ugandan town of Ibanda. Kobusingye borrowed Shs 25m from his bank to deposit with Cowe.

However, suspicions were mounting about the operation and in 2006 the Bank of Uganda tried to intervene, freezing the accounts (pdf) of Cowe on the grounds that they were collecting deposits from the public without the requisite licence. But the Ugandan High Court quashed the decision after Cowe complained they had not been given a hearing. While the high court’s decision would later be overturned by the appeals court in 2009, it would be too little, too late. Immediately after Cowe’s accounts were unfrozen by the high court, some of the directors emptied the organisation’s accounts, and fled with thousands of Ugandans’ deposits.

Kobusingye became one of the many Ugandans who lost it all. “I sold my car. Then, I would borrow here to deposit there, to try and keep my reputation,” says Kobusingye, who eventually had to quit her bank job in 2013 because the bank were concerned about his personal indebtedness.

Primary school teacher John Byaruhanga and his wife invested some of their savings in Cowe, and lost Shs 70m when it shut down. Now he can’t pay his five children’s school fees.

“I cried when the school first turned my children away [over the unpaid fees], because I still remember how I used to drive them to school, and how I would always pay fees promptly,” says Byaruhanga, who is now secretary of the taskforce for victims of the Cowe scheme.

Byaruhanga’s group has appealed for help from the Ugandan leadership, including writing to President Yoweri Museveni and the current prime minister, Dr Ruhakana Rugunda. But they have got nothing beyond promises that the matter will be looked into.

“We want to be compensated like any other disaster, because they compensated people of Bududa [after the landslides], and they compensated people in Kampala when their shops were burnt … the Bank of Uganda should have regulated these people and they should not have even got licensed to operate [as a non-profit],” says Byaruhanga.

The main complaint of most victims today is that the central bank did not intervene immediately to close COWE after it started taking money from the public and should therefore take responsibility for the crisis that ensued, a view shared by the Global Alliance for Legal Aid (Gala).

“The central problem with this laissez-faire attitude is that criminals who operate predatory financial schemes are very difficult for the general public to distinguish from licensed financial institutions,” says Jami Solli, executive director of Gala. “A licensing authority such as the Bank of Uganda, however, is in a much better position to separate the wheat from the chaff than the average consumer.”

“The Bank of Uganda is remiss in its duties as regulator if it simply states ‘buyer beware’, or tells people these institutions were not licensed, thus it is your problem if you lost your life savings.”

Solli wants the government and its donors to set up a fund to compensate victims, and have the bank loans written off, citing the country’s existing deposit protection scheme, where the central bank compensates any Ugandans whose bank or microfinance organisation closes, as a way of funding compensation.

Solli is also critical of the role played by banks such as Centenary and Stanbic, which was a banker for Cowe. Not only did Centenary fail to keep tabs on what its customer Cowe was doing, it did not properly investigate what the borrowers were going to do with the money lent to them. Both banks have chosen not to comment on their relationship with Cowe.

Neighbouring countries have set a precedent for action. In March, Business Daily newspaper reported that over 26,000 Kenyans sued the Kenyan government after fraudulent pyramid schemes stole Kenyan Shs 4.15bn (£27m) from them. Like Byaruhanga and Gala, the Kenyans argue that if the Kenyan central bank had done its job, the schemes would have been stopped before so many people lost so much money. The case is ongoing.

New report reveals extent of damage

In a recent report prepared for Gala, which is to take legal action on behalf of Cowe victims, the UK law firm Simmons & Simmons shared stories of victims struggling with debts after Cowe closed. These include taking loans from other lending institutions in a bid to pay old creditors and victims of the fraud killing themselves – unable to shoulder the weight of worry borne of debt.

They concluded: “It is evident from our investigation that there exists a clear and urgent need for the international community to intervene to provide relief to the victims and bring an end to the downward spiral of indebtedness.”

Cutting lifelines: ‘If we can’t send money home everyone suffers’

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Byaruhanga says he personally knows at least four cases of suicide arising out of the burden of Cowe’s activities. One is that of Cleophas Ndyanabo, who had worked as an accountant in Kanungu district in southwestern Uganda.

His widow, Resty Ndyanabo, says they lost Shs 140m when Cowe closed. “My husband was suffering. He had got loans from banks and money lenders so we could put money into Cowe. When it closed, the debts were too much for him, so, in 2009, he went to Lake Bunyonyi and drowned himself.”

Ndyanabo left Resty with six children, whom she is struggling to put through school. A peasant farmer, she says she sold virtually all the home assets, including land, but remains indebted.

Back in Ibanda, Leonard Kobusingye, now a farmer, says getting help would be akin to the Biblical story of Jonah, who was swallowed by a fish for three days before God brought him out alive. Her current debt stands at Shs 31m.

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