The ministry of Finance, Planning and Economic Development will close micro-finance businesses countrywide that will fail to comply with licensing by the Uganda Micro-finance Regulatory Authority (UMRA).
The Tier 4 micro finance institutions and moneylender Act of 2016 will be effective July this year and will see micro-finance businesses licensed.
The overall purpose of the law is to provide for the licensing, regulation and development of all Tier 4 micro finance institutions.
The Tier 4 include non-deposit takers such as credit only NGOs, Saccos, moneylenders and small member based organisations/community based micro finance institutions.
According to Mr Giduno Yusuf Salim, the communications officer for project for financial inclusion in rural areas, when the law becomes effective in July this year, a grace period of one year will be given to the existing microfinance institutions and money lenders to register with UMRA.
“We shall close all microfinance businesses that fail to comply with this,” he said.
He made the remarks during regional sensitisation meeting organised by ministry of Finance in Gulu Town over the weekend.
According to Mr Christopher Okema, the head of Saccos in Kitgum District, in order for the new law to work well, the ministry must work together will local savings groups.
He claims that in many cases people who are in these regulatory offices neglect opinions of local community, and with most Saccos are in rural areas this requires accessible offices.
“We do not want individuals who will be appointed in charge of the authority and end up becoming authority themselves. We need a leader who will listen to the local people and work together with them” said Mr Okema.
No SACCO shall carry on the business of financial services unless it is registered as a society under the Cooperative Societies Act andis licensed by the Authority. To that end, the Authority can determine what minimum requirements before licensing any institution. This provision will attempt to standardise these requirements across the entire sector.