The Ugandan government has introduced new measures to regulate interest rates charged by Tier 4 microfinance institutions and money lenders. According to a legal notice published on November 15, 2024, the maximum interest rate that lenders can impose has been capped at 2.8% per month or 33.6% per annum.
The notice, issued by Finance Minister, Matia Kasaija under the Tier 4 Microfinance Institutions and Money Lenders Act, Cap. 61, seeks to protect borrowers from exploitative lending practices. This move is seen as a response to growing concerns about high interest rates in the informal lending sector.
The decision followed consultations with the Uganda Microfinance Regulatory Authority (UMRA), in line with Section 89 (1) of the Act. Minister Kasaija emphasized the government’s commitment to promoting fair lending practices and enhancing financial inclusion for low-income earners who rely on these institutions.
The announcement marks a critical step in regulating microfinance operations, ensuring that borrowers are not burdened by exorbitant rates. It is anticipated that this measure will bring relief to many borrowers, particularly those in rural areas and underserved communities.
Stakeholders have been urged to comply with the new regulations effective immediately, with UMRA tasked to enforce compliance and monitor industry practices.
President Museveni has always been against the extortion by money lenders and pledged to introduce a law to regulate them.
“I want to bring a law to fight money lenders. Money lenders are becoming a problem, they go to our villagers and cheat them, charge them extortionately yet our inflation rate is very low at 3% or even lower but you find these people charging them 240%” he said.
Most of the money lenders have been charging the borrowers an interest rate of 20% upwards.
