Players in the Micro-finance Deposit Taking Institutions (MDIs) have backed the proposal by Government to increase their minimum paid up share capital requirements from 25,000 currency points (Shs500M) to 500,000 currency points (Shs10Bn), saying the changes will enable them engage in more products like insurance, agent banking and mobile banking with their customers.
According to Shafi Nambobi, Chairperson Association of Micro Finance Institutions of Uganda (AMFI), since the enactment of the Micro-finance Deposit Taking Institutions Act in 2003, the MDIs’ total assets have now grown to over Shs800Bn and the proposed increment in share capital would allow MDIs’ shareholders bring in more money to spur growth of their financial institutions.
“It also continues to build confidence in the sector especially because it is regulated and is also deposit taking and it also requires heavy capital expenditure in terms of infrastructure. If you look at the infrastructures that have been built by the MDIs, like the core banking systems alone, they don’t cost less than Shs5Bn for us to move to the digital economy. So, the Shs500M definitely can’t help us to build the infrastructure,” Nambobi said.
He further defended the Association’s stand making comparison with what is happening in other nations where the capital requirement is very high, saying if the similar move is adopted in Uganda, it would help MDIs grow in customer numbers and the proposed increment will go in tandem with the new amended act governing MDIs that saw the single obliger from 1% to 2%, which means the MDIs can be able to lend out more money to the customers.
He also revealed that managers of the MDIs agreed with Bank of Uganda on the timelines within which to comply with the capitalisation noting, “And we would like to mention that we are happy with the timelines that were given, with June 2024, being the last date by which all MDIs have to comply with the Shs10Bn. Over all, we can say that all the MDIs are largely compliant with the capital requirement and the majority are above the Shs10Bn that is being requested.”
“The average total assets for MDIs are in the range of over Shs10Bn, so this is something that we are supportive of and it is going to help us with bank insurance, agency banking, mobile banking. All this will require money to come into the company and for us we see that this fits into what has been amended,” added Nambobi.
Muwanga Kivumbi however raised concern on the whether the views presented by the Association are a representative of all members of the Association remarking, “Does this Association have other members? The entities that we are meeting, are the four that meet the requirements? We want to interrogate them enough whether they are representative of that sector? And whether this meeting was from the general assembly or meeting.”
It should be recalled that Speaker Among halted the consideration of The Micro-Finance Deposit-taking Institutions (Revision of Minimum Capital Requirement Instrument, 2022 because of the refusal by the Finance Committee to interface with stakeholders like the operators of MDIs in Uganda.
This was after she discovered that in the Methodology adopted by the Finance Committee during the consideration of the bill, only the Ministry of Finance and Bank of Uganda were consulted, leaving out the key players in the industry like FINCA, Pride Microfinance, EFC and UGAFODE yet these are the financial institutions that the proposed bill was targeting.
