Ugandans advised to desist from obtaining loans from unregistered individuals

Stakeholders in the Money lending sector have advised Ugandans to desist from obtaining loans from unregistered individuals

They say that all entities engaged in money lending must be registered and licensed by the Uganda Microfinance Regulatory Authority (UMRA).

This follows a recent Cabinet meeting at State House Entebbe, chaired by President Gen. (RTD) Yoweri Kaguta Museveni Tibuhaburwa, which agreed to review and enhance regulations governing moneylenders.

The decision was prompted by concerns that numerous moneylenders are driving many Ugandans into severe poverty due to exorbitant, unregulated interest rates.

Reports suggest that some registered and unregistered moneylenders are pressuring individuals into signing agreements they do not fully understand.

The government is now seeking to regulate the interest rates charged by moneylenders to protect people who are borrowing from money lenders. .

Arnold Katongole, a Business development manager at Anekama Financial services-ChamTowers, said that though the majority of borrowers do borrow with urgent need, they should always do background checks on individuals or companies they intend to borrow money from.

He cautioned borrowers against misusing funds by diverting them from their intended purposes, emphasizing that this behavior is a significant factor contributing to the high rate of defaults.

During the recent opening ceremony of the Southern and Eastern African Chief Justices Forum held at Speke Resort-Munyonyo, President Museveni urged the government to advocate for the creation of legislation aimed at regulating the practices of money lenders.

The President committed to taking a decisive action against predatory money lenders who take advantage of ignorant Ugandans.

 President emphasized that these lenders are increasingly problematic, as they target rural communities and deceive vulnerable individuals by imposing excessively high interest rates.

UMRA was established under the Tier4 Microfinance Institutions and Money Lenders Act, 2016 to license, regulate and supervise all Tier 4 Microfinance Institutions and Money Lenders in Uganda.

The Tier 4 Institutions include Savings and Credit Cooperatives (SACCOs), NonDeposit Taking Microfinance Institutions, Self Help Groups, and Moneylenders. The Authority hereby informs SACCOs, Moneylenders, and Non-Deposit Taking Microfinance Institutions to renew their licenses for the calendar year 2024.

The Authority further cautions the general public not to transact with unlicensed Institutions /Companies that provide financial services as stipulated in the Tier 4 Microfinance Institutions and Money Lenders Act, 2016 and the accompanying Regulations.