Tusuubira says ensuring transparency has enabled the public to make informed decisions.

The Uganda Microfinance Regulatory Authority (UMRA), is the regulator of Tier 4 financial institutions in the country. Currently, UMRA is focused on resolving consumer complaints, ensuring fair practices, and addressing the issue of unlicensed lenders through public awareness campaigns and enforcement actions. Edith Tusuubira, the UMRA Executive Director, spoke to Business Edge about their operations. Excerpts.

Please briefly explain the role and mandate of the Uganda Microfinance Regulatory Authority (UMRA)?

UMRA was established under the Tier 4 Microfinance Institutions and Money Lenders Act of 2016. Our core mandate is to regulate, license, and supervise all Tier 4 Microfinance Institutions and Money Lenders in Uganda.

This includes Savings and Credit Cooperative Organizations (SACCOs), Non-Deposit Taking Microfinance Institutions, Self-Help Groups (SHGs), and Money Lenders, ensuring they comply with the established laws and regulations.

How many institutions has UMRA licensed, and what does this suggest about the growth of Uganda's microfinance sector?

UMRA has licensed 1,802 institutions, including SACCOs, non-deposit taking microfinance institutions, and Money Lenders. This growth reflects the increasing formalization of the Tier 4 sector, which is key to enhancing financial inclusion and fostering economic development.

Over the past five years, UMBRA-regulated institutions have contributed UGX390 billion to tax and non-tax revenues—a remarkable 145% growth. This underscores the positive impact of regulation on the sector's development

How effective has UMRA been in addressing public complaints, and what has been the impact on the sector?

Since its inception, UMRA has processed and resolved over 800 public complaints, leading to the recovery of assets and securities for rightful owners. These interventions have been vital in maintaining integrity within the financial sector, ultimately boosting public confidence in microfinance institutions. We have handled cases involving over UGX 8.5 billion, often waiving excessive interest charges to ensure fairness.

Additionally, in response to concerns about predatory digital lending practices, we issued Digital Lending Guidelines. These address issues such as high-interest rates and data privacy violations, providing a structured framework for digital lending operations. We're also drafting the Tier 4 Lending Conditions Regulations (2024), aimed at curbing predatory practices and fostering responsible lending.

How do the new guidelines for Self-Help Groups (SHGs) contribute to financial inclusion in Uganda?

The guidelines for SHGs are a significant milestone in enhancing financial inclusion, particularly in rural areas where access to formal financial services is limited. With about 43% of Ugandans saving through these groups, the new guidelines are essential for safeguarding members' savings and enhancing the credibility of SHGs.

By formalizing and registering SHGs, we bring them into the regulatory framework, enhancing transparency and accountability. This reduces the risks associated with informal saving practices, such as fraud or mismanagement. Moreover, these guidelines foster financial literacy and sound governance within SHGs, ensuring their sustainability and effectiveness.

As a bridge between informal and formal financial services, SHGs now offer structured opportunities for members to save, borrow, and invest, contributing to the financial empowerment of rural communities.

What measures has UMRA implemented to protect consumers in the Tier 4 financial services sub-sector?

We have introduced Consumer Protection Guidelines that emphasize fair practices, transparency, and increased consumer confidence. These guidelines establish clear standards for handling complaints related to financial products and services and ensure that financial service providers adhere to minimum standards of fairness and equity.

To further protect consumers, we have made it mandatory for financial institutions to provide clear and detailed information on the terms and conditions of financial products. This transparency allows consumers to make informed decisions about their financial commitments. Additionally, we have created effective mechanisms for resolving complaints swiftly, ensuring consumers have access to timely redress when faced with unfair loan terms or contract disputes.

Why is the use of National IDs as collateral for loans prohibited, and how is UMRA enforcing this regulation?

The use of national IDs as collateral is prohibited under Regulation 18 of the Tier 4 Microfinance Institutions and Money Lenders Regulation (2018) because it exposes borrowers to unnecessary risks, including identity theft and fraud.

National IDs are intended for identification, not financial transactions. Using them as collateral undermines the integrity of the financial system and puts borrowers in vulnerable positions, where they may be pressured into agreeing to unfavorable terms.

We strongly advise borrowers to report lenders that demand National IDs as collateral. We are taking action against those who continue this practice and working with law enforcement agencies to ensure such lenders face legal consequences.

What steps is UMRA taking to combat the rise of unlicensed and non-compliant money lenders in Uganda?

We have observed an alarming increase in unlicensed money lenders and digital lenders operating illegally. In response, we have initiated public awareness campaigns to educate consumers on the dangers of engaging with unlicensed lenders and the importance of verifying a lender’s license before transacting.

Additionally, we are actively closing down unlicensed money lenders and digital lenders, signaling that non-compliance will not be tolerated.

Our website provides an up-to-date list of licensed money lenders and digital lenders, giving consumers the tools they need to verify any lender's legal standing. We urge the public to report any unlicensed operations, and we will continue enforcing the law to ensure compliance across the sector.