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Govt caps interest rate charged by money lenders to 2.8 per cent

At least 52 percent of adult Ugandans borrowed money in the five years to 2023. Parliament last Wednesday passed the Tier 4 Microfinance Institutions and Money Lenders Bill, 2024, that now awaits the signature of the President to give force to the law. PHOTO | FILE

By  MARTIN LUTHER OKETCH

What you need to know:

  • Although the Uganda Microfinance Regulatory Authority was licensing the Tier 4 Microfinance Institutions and Money Lenders, it has not been in a position to cap the interest rate they charge their clients.

The government has capped the interest rate on loans from the microfinance institutions and money lenders to 2.8 per cent per month and 33.6 per cent per annum following the passing of the Tier 4 Microfinance Institutions and Money Lenders Bill 2024.

Although the Uganda Microfinance Regulatory Authority was licensing the Tier 4 Microfinance Institutions and Money Lenders, it has not been in a position to cap the interest rate they charge their clients.

As such, these microfinance institutions and money lenders could come up with their own interest rates, which were too high, hence resulting in borrowers failing to pay and in the end, losing their properties.

Related

However, the Legal Notice Supplement Number 9 states that in the exercise of the power conferred upon the Minister responsible for finance by section 809 (1) of the Tier 4 Microfinance Institutions and Money Lenders Act, and in consultation with the Uganda Microfinance Regulatory Authority. The notice was issued on November 8, 2024.

About the prescription of maximum interest rate where the Minister of Finance, Planning and Economic Development’s name Mr Matia Kasaija is included states: “In accordance with section 89 (1) of the Tier 4 Microfinance Institutions and Money Lenders Act, the maximum interest that a money lender shall charge on the principal or the actual some of the money advanced as a loan to a borrower, is two point eight per cent (2.8 per cent) per month or thirty -three. Six per cent (33.6 per cent) per annum.”

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