245 money lenders apply for operational licences
Formalisation of the money lending business is taking root with more than 200 money lenders and non-deposit taking institutions signing up for licences under the newly implemented Tier 4 Microfinance Institutions and Money Lenders Act.
According to records at Uganda Microfinance Regulatory Authority (UMRA) the statutory authority charged with the supervision and regulation of money lenders and non-deposit taking institutions, at least 200 money lenders and 45 from non-deposit taking institutions have acquired a license since June 2018 when the authority became fully operational.
Non-deposit taking financial institutions under the Tier 4 Microfinance Institutions & Money Lenders Act 2016 are, SACCOs, non deposit taking microfinance institutions, self-help groups and community based microfinance institutions.
UMRA Spokesperson Edward Bindhe, besides regulation, licensing and supervision of the tier 4 microfinance institutions and money lenders, UMRA is also charged with the promotion of interventions necessary for the promotion of the tier 4 microfinance institutions.
None of the financial institutions under the authority’s watch can acquire a license without meeting the set conditions.
“For example a money lender has to have a certificate of incorporation, a certificate of good conduct (an updated one from Interpol, give us your address, give us particulars of your directors, Article and Memorandum of understanding and then the source of funding,” Bindhe said.
Applicants for the licence are required to pay a registration fee of Shs 50,000 plus another Shs 500,000 for the annual license.
“All payments are made through Uganda Revenue Authority, UMRA only receives proof of payment and other documents needed to secure a license,” Bindhe said.
Being a new authority, Bindhe said, UMRA has to undertake a massive sensitization campaign since a number of their targeted clients are still ignorant of the new law.
“We have to carry out a lot of sensitization to educate the public about this new Act and the license in particular. We used to have a Money Lenders Act 1952 which was repealed and replaced with this. The repealed Act required money lenders mandate to get their licences from the magistrates court, you find that many of them are still ignorant of the Act,” Bindhe said.
“Many money lenders still operate illegally; some take borrowers’ ATM cards which is not right, it does not guarantee the confidentially of the owner’s information,” he added.
Bindhe said that in a few months to come, the authority shall start inspecting license holders to ascertain if they are still complying to the rules.
“If anyone is found to have deviated from the regulations of the Act for instance failed to display their license and charging more interest than registered, the authority is mandated to penalize them,” Bindhe said.
Section 83(1) of the Act mandates UMRA to Authority revoke a money lending license if it is satisfied that the money lender has not commenced business within twelve months from the date of issue of the money lending licence; ceased to carry on the money lending business for which the licence was issued; furnished to the Authority, information or a document in connection with its application for a licence, which is false or misleading in a material particular; has been declared insolvent; has been wound up; is conducting business in a manner detrimental to the interests of the public; transferred or assigned its licence; or contravened the provisions of this Act.