The Uganda Microfinance Regulatory Authority (UMRA) has backed the directive by President Yoweri Museveni to curb the exorbitant interest rates charged by money lenders by imposing cap on the rates, saying the Authority had initially left the players to impose any rates so as to let self-regulation work in the sector.
The revelation was made by Edith Tusubira, Executive Director UMRA in a media interview where she welcomed the President’s directive saying that they had delayed to implement the guidelines because they thought stakeholders will be able to govern themselves, but with the exploitative nature on how the sector is being run, there will be need for a notice to be issued to curb exorbitant interest rates to ensure no party is exploited.
She explained, “It is right that we come up with interest rates that can curb the exorbitant and extortive lending which disrupts the market. We have since discovered that some of the lenders who aren’t behaving well are lending up to 20% per day and some of them are digital lenders, this is so distortive to the market and rightly speaking, the President is supported. We are coming up with ways to stablise the market.”
Tusubira urged the public to be aware that if they take up such funds with high interest rates, it would be very difficult for them to pay back which would further sink them into poverty.
“In fact, it is called predatory lending, if we entertain that in our market, we shall find it difficult to exist. I know we have some good money lenders, but we also have those who are exploitative in the market,” she said.
It should be recalled that last week, President Museveni while addressing NRM MPs during a caucus meeting held at State House-Entebbe ordered the Ministry of Finance, Planning and Economic Development Finance to release regulations to cap interest rates charged by money lenders as stipulated under Tier 4 Microfinance and Money Lenders Act.
Section 90 of the Tier 4 Microfinance and Money lenders Act stipulates; (1) The Minister may, in consultation with the Authority, by notice in the Gazette, prescribe a maximum interest rate which a money lender shall charge.
The provision in section 90(2) further adds that; A money lender who charges an interest that is higher than the maximum interest rate prescribed by the Minister commits an offence and on conviction, is liable to a fine not exceeding fifty currency points and the court may, in addition to the fine order that the money lenders licence be canceled and the money lender pays the borrower any money paid in excess as a result of the interest rate charged.
The President’s directive followed several complaints from MPs who lamented about the persistent financial woes they are grappling with, after taking up loans from money lenders, but are now struggling to pay up their debts, blaming this on the high interest rates imposed on them by the money lenders.
“The President is concerned that many MPs are indebted and he is saying that you cannot be good leaders if you are indebted. And he is saying that the biggest issue that underpins this kind of position that MPs find themselves in is when they decide to put the entire constituency on their shoulders,” Bashir Lubega (Mubende Municipality).
The Presidential directive comes at the time the Parliamentary Commission cancelled all Memorandum of Understanding it signed with some money lenders, after MPs complained that these money lenders have been harassing and threatening them with imprisonment if their loans aren’t paid.
Deputy Speaker, Thomas Tayebwa while announcing Parliament’s position said recently, “We canceled all the MOUs because we found they had made it a trend they have tried to lobby and surprisingly lobby using some of you that we allow them, but we have made that decision as leadership of this Parliament and we aren’t going to rescind, if you want to deal with the money lender, go and do it outside the network of Parliament and at your own condition so that we aren’t responsible in any way.”
