MPs asked to enact competition law to cap interest rates
The current interest rates on average are at 26%.He explained that if the MPs push for the new law commercial banks can' ...
PIC: A senior economist Fred Muhumuza (right) talks to Hoima MP Lawrence Bategeka during a breakfast meeting on interest rates in Kampala. Photo by Francis Emorut
A senior economist, Fred Muhumuza, has called upon the Members of Parliament to enact a competition and policy law in order to cap the interest rates."Setting up competition law and policy should be done as soon as possible to address interest rates problem," Muhumuza told the lawmakers.
The current interest rates on average are at 26%.He explained that if the MPs push for the new law commercial banks can't sell the property of a borrower or close a business of an individual because he/she is protected by the law and with the law in place the banks will be tamed.
Muhumuza who is also a senior lecturer at the School of Economics Makerere University was speaking during the breakfast meeting on interest rates and conflicts in the Public Finance Management Act (PFMA) with Local Government operations
The breakfast meeting was organized by Civil Society Budget Advocacy Group. Presenting a paper titled Pressure behind Uganda interest rates the economist advised the lawmakers either to move a private members bill or wait for the government to table it which has taken 10 years.
He outlined the drivers behind interest rates in the country among them cost of fund, tax expenses, profits, competition, inflation, consumer literacy, management competence, credit rating of client and contingency reserve.
He told the MPs that government is the main culprit of fueling high interest rates which are on average at 26% because it started borrowing since 2013 to the tune of UGX2.3 trillion as of July 2016.
"That means the money is not in the system. We are competing with government," he said.
The chairman of Parliamentary on Local Government Committee Raphael Magezi agreed with the economist saying that MPs need to be mobilized and support the cause of capping the interest rates.
"As long as I remain a Member of Parliament I will always protect the ordinary person from exploitation," Magezi said.The lawmaker pledged to engage the MPs and bring them on board to agitate for the competition law and policy.
Oyam Woman MP Santa Alum pointed out that Ugandans have been exploited as there is a lot of inequality in lending rates and appealed to fellow MPs to rise above the occasion."We have the power to make laws so let's start debating about the capping of interest rates," Alum said.
Workers MP Margaret Rwabushaija asked fellow lawmakers to build a consensus by holding a workshop on interest rates so as to be enlightened by experts before starting the debate.
Rukungiri MP Ronald Kaginda mooted the idea of having a forum where customers can discuss issues affecting them due to high interest rates so as to engage the bankers since there is Uganda Bankers Association.
Kyegegwa woman MP Stella Kiiza observed that the debate about interest rates is an ice breaker."Money sharks control the economy. It is a big elephant which MPs should devise strategies of addressing it," Kiiza said.
She called for the engagement of banking sector and Uganda Bankers Association. Hoima MP Lawrence Bategeka noted that the cost of monetary policy has been left to Bank of Uganda and this needs to be checked.
"We have not capped Bank of Uganda borrowing from banking system, that must be done," Bategeka said. Agago Woman MP Franka Akello noted that the borrowers are suffocating with the burden of interest rates and called upon legislators to kick start the debate.
David Walakira a policy budget analyst told the legislators the importance of capping interest rates as increase on disposable and discretionary income, encourages financial inclusion, and the financial markets will be stabilized since the earnings from investment in the banking industry will be predictable among others.Carol Namagembe programme associate appealed to MPs to expedite the enacting of competition law for the benefit of the people.