Money lenders have urged the government to rethink its directive of capping lending rates as the country heads into the festive season.
Thank you for reading this post, don't forget to subscribe!The government recently issued a legal notice that capped the maximum interest money lenders can charge at 2.8% per month or 33.6% per annum.
Some economists and business people have warned that the capped rates will discourage money lenders leading some to go underground.
In their meeting, the money lenders under the Money Lenders Association of Uganda (MLAU) warned that people who rely on their services could be headed for tough times.
“MLAU involves ethical money lenders who have an interest in safeguarding Uganda’s financial systems through ethical credit services to borrowers. During this Christmas season and into the new year when school fees are due, we normally see a surge in borrowing activities,” argued Jonan Kandwanaho, the chairperson of MLAU.
He said the new policy capping rates will affect their business during the coming season.
Kandwanaho said the association plays a crucial role in lubricating the gears of Uganda’s economy, particularly in sectors where traditional banking services may be limited or inaccessible.
According to the Uganda Microfinance Regulatory Authority (UMRA), there are 1,302 licensed money lenders in the country who serve more than 2.5 million people. They have a total loan portfolio of Shs 1.2 trillion.
“Money lenders often provide the necessary capital for farmers to buy seeds and fertilizers, for shopkeepers to stock their shelves, and for transport operators to maintain their vehicles – all essential activities that keep the wheels of commerce turning. Moreover, by offering financial services to those who might otherwise be excluded from the formal banking sector, MLAU members contribute to financial inclusion, which is a key driver of economic growth and poverty reduction,” he said.
He said they are willing to work with the government and the regulator to address this.
“MLAU believes that through constructive dialogue and cooperation with regulatory bodies and the government, we can address all concerns, improve industry standards, and continue to serve Ugandans responsibly to safeguard the country’s financial future,” Kandanwaho said
