Africa-Press – Uganda. Government on January 30 suspended the issuing of operating licences to digital/online money lenders until the Ministry of Finance, Planning and Economic Development is fully furnished with information on how they are monitored and regulated.
During a meeting with money lenders in Kampala, the State minister of Finance-in-charge of Microfinance, Mr Haruna Kyeyune Kasolo, issued the directive to the Uganda Microfinance Regulatory Authority (Umra), which regulates the money lenders, saying their business is unclear.
“Umra, you are hereby directed to immediately stop licensing them and not renew the licences you issued to old ones. We cannot just risk Ugandans’ money,” he said.
“Unlike other money lenders who have a clear location, these online money lenders are untraceable and this has given them leeway to steal from Ugandans. I can’t manage them. We need to study them,” he added.
The suspension came at a time when Umra is planning to start the implementation of the Digital Lending Guidelines which it developed in August last year to regulate online money lenders.
The guidelines, which were developed after Umra conducted a benchmarking exercise in Kenya, were in response to the mass public outcry over online money lenders who were preying on Ugandans and charging them exorbitant interests.
This was highlighted in a special report on April 5.
They include baring online money lenders from charging defaulting customers penalty fees exceeding 50 percent of the total amount they lent them, compulsory acquisition of licences, having a physical address, and availing details on consumer data protection, anti-money laundering mechanism, and reporting of requirements and submitting to Umra all the information about their companies including the number of products like Apps, technologies used, employees, physical address, among others.
Despite multiple online lenders defending themselves before the minister on January 30, the latter directed Umra to organise a meeting at his office which will be attended by all stakeholders , “so that you people will convince me how your operations (work) because I cannot allow something I won’t manage to defend”.
Not happy
Mr Wilfred Wabwire, the country manager for JUMO Uganda, an online lending platform, said the minister was being deceived.
“The problem here is that people are combining people who operate on Applications and the legitimate businesses because we have a physical location, and do not bombard our clients with texts and calls but rather engage them smoothly and that comes after 180 days since they took the loan,” he said.
Speaking to reporters on the sidelines of the event, the Executive Director of Umra, Ms Edith Tusubira, said the issues of the online money lenders will be resolved in a meeting which will “probably be held next week”.
“We are going to sit and discuss with them the mechanism and what I can assure you is that the issues will resolved and their licences issued to them,” she said.
Meanwhile, Minister Kasolo authorised Umra to resume issuing operating licences to other money lenders.
“I took a decision to halt the issuance in December following the numerous complaints about money lenders I received during my countrywide tour. To prove the allegations, I also disguised myself as a local and went to the lenders but what I saw was horrible,” he said.
“These people were confiscating clients’ properties, forcing people to sign sales agreements, using National IDs as collateral, confiscating people’s properties, which angered me and I took that decision,” he added.
Mr Ben Kavuya, the chairperson of the Uganda Money Lenders Association, asked the authorities to stop bundling them with unregistered lenders.
“All the atrocities committed by illegal money lenders are put on us, which is not good and this must stop. We are also requesting you to work on the issue of selective issuance of licences where some members are denied licences on unfair grounds,” he said.
Mr Kasolo said his ministry will work towards the amendment of the Tier 4 Microfinance Institutions and Money Lenders Act, 2016, and update it, to ensure that it addresses all the current legal gaps.
Background
On April 5, PRESS carried a story titled “Online money lenders preying on Ugandans,” which showed how some online money lenders were operating illegally and charging extortionate rates.
Operators of some of the applications have since registered with the Uganda Microfinance Regulatory Authority (Umra) under one company.
In August, Umra revealed that they were working on new guidelines for the digital or online money lenders, which would, according to officials in the Authority, restore sanity in the industry.
The 10 guidelines were developed after a collective effort involving the regulator, the Ministry of Finance, and Bank of Uganda.
They cover licensing, governance, credit information, place of business, digital credit, consumer protection, an anti-money laundering mechanism, and reporting requirements.
False advertising through sending unsolicited bulk short messages to cellphone holders, social media and making random calls have been prohibited.
During the loan application, the loan guarantor shall also be notified by the company before issuing the loan to a prospective client.
The guidelines further direct the digital lenders to file monthly reports with Umra for period review. Failure to report may lead to sanctions and suspensions.
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