By Henry Sekanjako and Paul Kiwuuwa

MPS on the national economy committee have asked the finance ministry to formulate policies to protect Ugandans from the high interest rates charged by commercial banks.

This follows the reluctance by commercial banks to cut down interest paid on loans, despite calls by the Central Bank to have them reduced.

Bank of Uganda recently reduced its lending rates from 21% to 13%, with a call on commercial banks to reduce their lending rates, which had risen to above 23%.

Speaking during a meeting with the Bank of Uganda and the finance ministry officials about interest rates on Friday, the MPs said there ought to be a policy that regulates commercial banks on financial matters.

“There must be a legislation on this. It is painful. People are losing property to commercial banks because of failure to pay back high interest loans,” said Wafula Ogutu, the MP for Bukholi Central.

“Bank of Uganda is helpless because there is no policy to act on commercial banks. We have to bring the Bill as soon as possible. If not, I will introduce a private member’s Bill,” he added.

The MPs said most of the commercial banks were being controlled from outside Uganda, which had made it hard for Bank of Uganda to act on them effectively.

The committee chaired by the Buliisa MP, Stephen Mukitaale, also asked the Central Bank to consider revising salary loans so as to avoid the interest charged on them from rising.

MPs also wondered why lending rates in Uganda had increased more than in Kenya, Tanzania and Rwanda.

The director of supervision at Bank of Uganda, Justine Bagyenda, said they had communicated to the commercial banks about reducing the interest rates, but they had not fully complied.

She told MPs that introducing new policies to govern commercial banks would scare away investors, adding that the country should instead look at using the existing policies to solve the problem.

Finance minister Maria Kiwanuka said the Government was considering strengthening the Uganda Development Bank to save Ugandans from high interest rates being charged by commercial banks.