The Chief Executive of Uganda Microfinance Regulatory Authority (UMRA) says money lenders and non-deposit-taking microfinance institutions should charge interest rates in the region charged by Commercial Banks.
Avu Elly Biliku, in an interview with this publication on Wednesday said the microfinance law stipulates that money lenders and non-deposit-taking MFIs should not set very high interest rates.
Biliku says although short-term micro loans are hard to manage, that does not justify the very high interest rates charged by money lenders, or the so-called “money sharks.”
Commercial Banks are charging in the range of 18 to 23 percent, but money lenders are charging way beyond that in addition to forcing sale agreements as security.
Asked how UMRA will ensure the money lenders do no overcharge their clients, Biliku says they are going to heighten compliance monitoring.
Biliku stresses that money lenders and MFIs play a crucial role in the economy, especially for micro, small and medium enterprises that is why they need to be regulated instead of being suffocated.
There are tens of thousands of money lenders and MFIs in Uganda, but only 260 have so far been registered by UMRA.
According to Biliku, most of the money lenders and MFIs are concentrated in Kampala and central Uganda.