UMRA to start enforcement operations against unlicensed money lenders

Uganda Microfinance Regulatory Authority (UMRA) is set to start enforcement operations against money lenders who operate without licenses in the country.

The authority has noted with concern that there are mushrooming unlicensed money lenders and digital lenders around the country who are conducting business in defiance of the sections under Tier 4 Microfinance Institutions and Money Lenders’ Act, 2016 and accompanying regulations.

The Tier 4 Microfinance Institutions and Money Lenders’ Act, 2016, among other things, stipulates that; “A company shall not operate a money lending business without a license.”

The Act also prohibits money lenders from asking for National IDs from their customers.

“A money lenders shall not take National ID, passport, warrant card, or other documents establishing the identity or nationality of the holder, bank savings, ATM cards and security codes for the ATM cards as collateral for money borrowed”.

“Effective July 2024, we are going to engage different relevant agencies on ensuring that lenders who are still operating without licenses, are handled within the laws of this country,” Racheal Vanesa Muhwezi, the manager in charge of microfinance institutions at UMRA said.

She made the remarks during a recent media briefing aimed at showing the authority’s performance over the years at their headquarters at Rwenzori Towers.

In support of her take, the Executive Director at UMRA, also warned money lenders who have continued to solicit national IDs from their clients as collateral to stop it before they mount operations that will apprehend and take the victims to the courts of law for prosecution.

Edith Tusuubira Namugga, the UMRA Executive Director, said they are in the final stages of issuing the Tier 4 lending conditions regulations (2024) to deal with predatory challenges.

UMRA has conducted consultative engagements with sector players to draft these lending conditions with the objective of restoring sanity in the Tier 4 Microfinance sector.

Other regulations issued by the authority

This move has come at a time when UMRA has previously issued a number of regulations that include; the Digital lending guidelines (issued in March 2024), Self-Help Groups’ Guidelines (2023) and the Consumer Protection guidelines, with the aim of regulating and bringing sanity to the sector.

“The guidelines seek to address all the concerns raised by the public about this internet -based lending service ranging from high interest rates, by these digital lenders, violation of data privacy, lack of physical address, confidentiality issues,” Tusuubira says.

Source:  NewVison