Inmates on remand over civil debts in Luzira Prison have petitioned Chief Justice Alfred Owiny Dollo to probe alleged corruption by magistrates and court bailiffs.

The over 100 petitioners said they were not served with court summons to defend themselves on soft loans offered by money lenders and banks against post-dated cheques and loan agreements.

They accused bailiffs of conniving with security operatives to raid their homes, offices, and business premises.

“Court bailiffs with the help of court officials do not only deny litigants to be heard in a fair trial, but they are now charging exorbitant fees which in most cases exceeds that of advocates and the loan amounts obtained,” the petition reads in part.

They noted that a debtor with a loan of sh500,000 is produced before a magistrate and coerced to accept to pay a principal sum of sh500,000 plus lawyer’s fees, sh1m and that of the bailiffs to a tune of sh2.6m

They claim that a debtor who obtained a loan of sh500,000 ends up being forced to pay sh4m, excluding the high interest, which is always over 15 to 30% per month and at times per week.

Money lending regulation

Owing to the challenges that come with money lending, James Sendawula, an economist appeals to Parliament to enact a law that will regulate private money lending to protect small and medium enterprises (SMEs) against the harsh conditions of the loan sharks.

“Under the Money Lenders Act of 1952, money lenders do not seem to have a clear regulatory body, as a result, borrowers have lost their properties to loan sharks because there are no strict controls to govern private lending,” Sendawula told New Vision.

According to the Act, money lenders lack strict regulations to govern their operations. They are simply required to obtain a license before initiating such businesses.

“Due to weak laws and regulations, money lenders tend to cheat borrowers by imposing high interest rates of almost 50% hence debtors end up losing their property to loan sharks while others end up behind bars having failed to pay back debts,” Sendawula said.

He explained that currently, the Bank of Uganda’s regulation and supervision covers only commercial banks, micro deposit institutions, credit institutions, forex bureaus and money remittance companies, however, money lending is not adequately regulated Sendawula explained.

Sendawula observed that small business communities prefer acquiring loans from private money lenders as opposed to financial institutions because the procedure of acquiring loans is much easier.

He suggested the government review the Money Lender’s Act to ensure that it restricts lenders from charging exorbitant rates.