Overview:
The minister’s directive is contained in Legal Notice No. 21 of 2024 issued on November 8 and gazetted on November 15.
The Minister of Finance, Planning and Economic Development, Mr Matia Kasaija, has directed that all the Tier 4 microfinance institutions and money lenders can only lend out money to borrowers at the maximum interest rate of 8 % per month or 33.6 % per annum.
The minister’s directive is contained in Legal Notice No. 21 of 2024 issued on November 8 and gazetted on November 15.
Mr Kasaija said this was reached following consultations with the Uganda Microfinance Regulatory Authority (UMRA), which is mandated to regulate and supervise the money lending business in Uganda.
“IN EXERCISE of the powers conferred upon the Minister responsible for finance by section 89 (1) of the Tier 4 Microfinance Institutions and Money Lenders Act, and in consultation with the Uganda Microfinance Regulatory Authority, this Notice is issued this 8th day of November, 2024,” it reads in part.
“This Notice may be cited as the Tier 4 Microfinance Institutions and Money Lenders (Prescription of Maximum Interest Rate) Notice, 2024. 2. Prescription of maximum interest rate In accordance with section 89 (1) of the Tier 4 Microfinance Institutions and Money Lenders Act, the maximum interest rate that a money lender shall charge on the principal or the actual sum of the money advanced as a loan to a borrower, is two point eight percent (2.8 %) per month or thirty-three point six percent (33.6 %) per annum,” it adds.
UMRA has described the development as good news, adding that the government has answered people’s prayers.
“Dear Ugandans, following the public outcry over the exorbitant unregulated interest rate, @mofpedU through Hon @MatiaK5 and Hon. @HonKyeyune have answered your prayers,” UMRA wrote on their social media handle X.
Interest rates for loans from moneylenders and commercial banks have not been capped, leaving lenders free to set their own rates.
This comes nearly two months after President Museveni said he was introducing a law against what he described as exploitative money lenders.
“Money lenders are becoming a problem. They go to our villagers [and] cheat them,” President Museveni said during the opening ceremony of the Southern and Eastern Africa Chief Justices Forum (SEACJF) conference held at Speke Resort Munyonyo in October.
Museveni then gave an elaborate example of how ignorant people are exploited by cunning lenders.
“Inflation rate in Uganda is very low. It is only 3 percent…even lower, but you find people charging 240 percent, in an economy where the inflation rate is only 2 percent. Why do you do that?” he said.
“…. Of course we are going to make the law. But if it was me, even before the law came, just using the law of contracts…because that is what they are claiming now, that there was a contract between an illiterate villager with the money lender that they signed something and in that document, they do not say that X borrowed from Y. [Rather] they say X bought the house of Y, so a lending contract is hidden as a purchase contract,” Museveni added.