Money lenders strip hundreds of property
Jun 17, 2013
Money lending has become a blossoming business in the country today. However, as Charles Etukuri writes, some money lenders are not interested in recovering the money they lend, but the properties that have been used as security
Sunday Vision
Money lending has become a blossoming business in the country today. However, as Charles Etukuri writes, some money lenders are not interested in recovering the money they lend, but the properties that have been used as security
When her husband, Sgt. Fred Atweta a Uganda People’s Defence Forces (UPDF) soldier, passed away in early 2000, life became hard. With a huge family to take care of, Margaret Atweta decided to rent out her house in Bukoto, Block 213 plot 2013 to Michael Nuwagira to be able to take her children to school and meet other basic needs.
On March 17, 2005, Atweta and Nuwagira entered into a tenancy agreement under which the tenant would pay sh500,000 per month. The rent was, thereafter, reviewed to sh1m.
“He started defaulting and could not pay the monthly installments. The water and power bills went unpaid too and the house was in a sorry state. I could not get access to my own house which remained guarded,” Atweta says.
“I approached him one day and told him that I urgently wanted money to renovate the house because in its current state, it could not fetch rent worth its market value,” she says.
Nuwagira then introduced Atweta to a businessman, Ephraim Ntanganda, who offered a quick solution.
Atweta had tried to get money from banks, but it was difficult because of the bureaucracy and the paperwork required.
“He (Ntanganda) was willing to give me the money I required at an interest rate of 20%. He gave me sh20m and I was required to pay sh30m plus interest within three months. They then demanded that I hand over the original copy of my title and also sign some blank transfer documents just in case,” Atweta says.
“I was expecting some money from the sale of another piece of land within the three months and I was sure that I would pay the money in time,” she adds.
She got the money before the three-month period expired. But then the cat and mouse game started.
“When I went to the money lenders’ shop to pay the money, I was told he was not there.” When she called, they would not answer their phones.
Unknown to her, Nuwagira and Ntanganda had connived to make sure she loses her property, by dodging her so that she would not meet the stipulated deadline.
Sensing something sinister, Atweta immediately went to court and paid the money. “I could not stay with the money because I knew something sinister could happen and I could lose all the money so I opted to pay the money at the Mengo court and a receipt was issued to me,” she says.
When she finally met Ntanganda, he told her because she had not honoured her part of the deal, she had lost her property.
“They plainly told me that the house I claimed was no longer mine — that I had lost it the moment I defaulted on the date we had agreed upon.”
Despite pleas that she had attempted to contact him before the deadline, and that she had deposited the money in court and been issued a receipt which she showed them, Ntanganda transferred the property, valued at over sh900m, at a paltry sh30m.
The current appearance of Atweta’s house after dismantaling its original design
Money lenders’ world
Welcome to the world of money lenders and shrewd businessmen who are amassing wealth as they impoverish hundreds of Ugandans. These money lenders are not interested in recovering the money they lend, but the properties that have been used as security.
“Many people are resorting to money lenders because of desperation. It is easier to get money from the money lenders because in most cases, all they ask for is a post-dated cheque and one is made to sign a simple loan agreement.
In some cases, one will be asked to either give in a copy of a land title, car logbook, sign a blank transfer document or even park their cars,” says Ibin Senkumbi, the Kampala Metropolitan Police Commander.
They can also ask you to attach your phone, camera, laptop, motorcycle, or household item as security.
“When you need money, in 20 minutes you can have your money, but it’s the consequences of that transaction that should leave you more worried. In some cases, the clients are so desperate for money that they don’t take into account the risks involved,” Senkumbi says.
Several traders in Kampala confessed to Sunday Vision that they have lost their properties to money lenders. Most of them reveal that the money lenders play hide and seek, and sneak up on a client after the due date for payment agreed upon, to claim the client’s property, citing default in meeting the deadline.
“On the last payment date he suddenly became busy and switched off his phone,” says Moses Okemba who lost his new Land cruiser after borrowing sh6m to clear taxes for it.
“I shipped a car and paid sh65m for it. It was parked in a bond as I waited to clear taxes with the Uganda Revenue Authority.”
A friend introduced him to a money lender who offered low interest rate. “It was 10% per month,” Okemba says.
False interest rates
Many money lenders charge a seemingly lower interest rate than banks, but on closer scrutiny, one may end up paying a lot more than what legal financial institutions would offer.
A money lender would, for instance, charge an interest rate of 5% per month. People who are not familiar with numbers may not know that this is three times higher than the 20% annual interest rate that some commercial banks charge.
Kampala City Traders Association spokesperson Issa Ssekito, says: “Businesses have closed and some are performing poorly because the traders use what they could have earned as profit to pay back the interest rates.”
Some traders and businessmen who have ventured into money lending today own streets and several houses in and around Kampala.
Apart from losing property, many people are languishing in prisons for failure to pay back the money they borrowed. In Luzira, for example, there are over 30 inmates jailed under these circumstances.
A source in the judiciary told Sunday Vision that many money lenders collude with court bailiffs and magistrates to jail their borrowers, and later extort money from them.
A debtor in Luzira told Sunday Vision that when he failed to pay the money that had been lent to him, he was never summoned. “Bailiffs raided my office and pulled me out before my bosses and fellow employees and rushed me into a magistrate’s chambers, charged and sentenced me to six months in prison. I was driven to Luzira,” he says.
He had borrowed sh3m from a money lender and the magistrate ordered him to pay the principal amount plus the interest rate. He was also ordered to pay the lawyers’ fees of sh2m and the bailiff sh1.5m.
“In total the figure came to about sh7m. I opted to serve the sentence, since I had also lost my job,” he says.
MPs not spared
Sources in Parliament told Sunday Vision that MPs were some of those who were badly affected. “Some are even afraid to leave Parliament for fear that they could be arrested,” a source said.
At Parliament, there are over 10 firms that operate and lend funds to MPs who require money because of demands from the constituents and a desire for some of them to live a life beyond their means.
Several legislators have been arrested outside the precincts of Parliament while some have lost their cars. It is because of this that the Speaker of Parliament, Rebecca Kadaga, convened a special meeting for the newly elected members in 2011, warning them about the dangers of excessive borrowing and money lending institutions.
“Even before we were sworn in, money lenders were all over Parliament with sweet offers,” says former Soroti Municipality MP Charles Ekemu.
In cases where an MP fails to pay, the House accounts section may get involved where an agreement has been signed, but the money lenders prefer to hire bailiffs.
Efforts to regulate money lenders
The Money Lenders Act is supposed to regulate the activity of money lenders in the country but it does not provide guidelines on the acceptable rates.
The act requires money lenders to:
Annually obtain certificates from a magistrate who has jurisdiction over the area they operate in
Obtain a license from a local authority annually
Lend at interest rate not exceeding 24% annually, and
write contracts between the lender and the borrower for legal purposes.
Despite these regulations, very few adhere to them.
The Ministry of Finance and Bank of Uganda is tasked with regulating the lenders, but it seems they have not been able to accomplish this task.
However, Bank of Uganda is working on a new regulation — the Consumer Protection Mechanism — to protect borrowers from being cheated or exploited by money lenders.