Hellen Masika (L), the Deputy Executive Director at the Microfinance Support Centre responding to COSASE queries.
The Uganda Microfinance Support Centre – MSC, is facing intense scrutiny over the unlawful disbursement of 4.1 billion Shillings to different Savings and Credit Cooperative Organizations – SACCOs.
Parliament’s Public Accountability Committee on Commissions, Statutory Authorities, and Enterprises – COSASE led by Joel Ssenyonyi is probing the entity following the Auditor General’s report for Financial Year 2021/2023 which cited irregular operations.
According to Ssenyonyi, during the reviewed fiscal year, the Centre approved four loans totaling 4.1 billion without proper appraisals, noting that without loan appraisals, there shouldn’t have been any recommendation for anyone to get a loan.
Ssenyonyi tasked Hellen Masika, the Deputy Executive Director at Microfinance Support Centrre to explain on what basis the loan was disbursed, allaying fears that there could have been a conspiracy among the staff involved to defraud the Government.
Masika admitted that loans were disbursed without adequate appraisals blaming it on the recruitment of staff in the organization at different levels with varying levels of professional experience.
Mukisa told the Committee that there are those who are very experienced and those who are new and learning, adding that through continuous training, the anomaly has been improved, sparking criticisms from legislators.
Peace Judith Achan, the Nwoya District Woman Member of Parliament observed that Mukisa’s response reveals a likelihood that that was fraud and connivance at MSC which facilitated the irregular loan disbursements.
Kashari South County MP, Nathan Itungo cited Section 4.5 of the Microfinance Support Centre Credit and Operations Manual 2017 which provides for areas of focus during the loan due diligence process, including security for collateral to be offered.
Itungo discredited Mukisa’s justification on grounds that the new loan officers contravened the Credit and Operations Manual 2017 while the ED watched without reprimand, and therefore should be held liable for the breach.
While Section 36(1) (a & b) of the Tier 4 Microfinance Institutions Act and Money Lenders Act, 2016 provides that a SACCO shall not carry on the business of financial services unless it is a registered society; the Auditor General discovered that 56 SACCOs were issued with operating licenses by Uganda Microfinance Regulatory Authority – UMRA in the FY 2022 to operate.
In the report, the Auditor General faulted the MSC for failing to give due attention to the assessment of the financial performance of SACCOs that applied for the loans. A total of 3.7 billion in loans was disbursed to clients who lacked vital documents, whereas 1.3 billion was advanced to clients without collateral.
Further, the Auditor General implicated the entity for failing to absorb 21.2 billion of the Emyooga grant in the financial year that ended on 30 June 2022. Up to 100 billion was meant for SACCOs under the Emyooga program but only 78.8 billion was disbursed.
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