Microfinance institutions in Uganda have been warned against charging high rates on borrowed money.

This was revealed by the Uganda Microfinance Regulatory Authority executive director, Edith Tusubira, during the launch of the association of non-deposit-taking microfinance institutions at the Fairway Hotel in Kampala on March 15, 2024.

Tusubira noted that through complaints from Ugandans, it was discovered that some of the major challenges related to high-interest rates, mistreatment from lenders, confiscating national identities and rude loan recovery methods, among others.

“We have, however, sat down with these money lenders and explained why there must be sanity in the market," she says.

Carol Atuhairwe, a Senior Microfinance Officer From UMRA signing on the board during the launch.

She, however, noted that they have also engaged the borrowers in understanding the value of paying back when they borrow.

About digital lending, Tusubira noted that the authority is working with other government agencies to come up with guidelines to help the sector.

“We have carried out sensitizations and consultations with key sector players, including digital innovators, to ensure all Ugandans benefit from microfinance institutions," she says.

She, however, warned Ugandans to only borrow money from registered microfinance institutions. 

Atuhaire Francis, the chairman of the Association of Non-Deposit-Taking Microfinance Institutions, says the sector faces several challenges for both lenders and borrowers, which the association will be able to address.

According to Atuhaire, less capital, double taxation, unprofessionalism, and multiple borrowing are some of the challenges microfinance institutions have been facing, which could be easily addressed under this association.

Raymond Peter Kiwanuka from the Association of Non-Deposit-Taking Microfinance Institutions says financial institutions need to work together for the success of the sector.

He says that with the association, it will be easier to partner with other financial firms, which could enable them to access finance at a relatively low-interest rate without collateral security.

He says the association has also come to address the needs of women and youth through credit. 

Kiwanuka says such groups of people need capital to run their businesses, which may not be easier to get if they operate as individuals.