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Another Microfinance Institution (MFI) Closes in Uganda as Chaos Continues in the Sector

Another Microfinance Institution (MFI) Closes in Uganda as Chaos Continues in the Sector

The Support Organisation for Micro Enterprises Development (SOMED), a microfinance firm in the Kibaale District of Uganda was shut down in December last year while police claim they are investigating allegations of extortion, embezzlement and fraud. The company had been offering low-interest loans since 2004.

This event comes less than a month after the central bank in Uganda, the Bank of Uganda (BOU), issued a statement warning that customers in the country’s Savings and Credit Cooperatives (SACCOs) - a type of microfinance institution (MFI) not regulated by the bank - may lose their savings without the BOU being able to intervene or provide compensation for those clients that suffer. As a result, violence erupted at the headquarters of one of the SACCOs under investigation.

This is the latest twist in an on-going story highlighting the dysfunctional microfinance system in Uganda, which has been reported by MicroCapital. So far a number of SACCOs have been investigated by the police and shut down, with public worry about the system leading to satirical skits in the national theater.

However, it is unclear whether SOMED has been registered as a SACCO or is operating as a standard MFI, which means that Uganda’s problems may be expanding beyond the SACCO sector. SOMED is not one of the four MFIs that are currently regulated by the BOU.

In 2003 SOMED reached the shortlist of MFIs applying for the Rural Pro-Poor Innovation Challenge (RRPIC), with its plan to use RPPIC funds to help provide financial services to women in rural areas of Uganda. The RRPIC is sponsored by the International Fund for Agricultural Development (IFAD) in its effort to help the rural poor.





Another Microfinance Institution MFI Closes in Uganda as Chaos Continues in the Sector - To learn more about this author, visit David Satterthwaite's Website.

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David Satterthwaite
(Visit David's Website) David brings 10 years of experience in microfinance management, social entrepreneurship, non-profit management/fund-raising and microfinance investment research. David is the Chairman and President of Prisma Microfinance, Inc., a retail “microbank” operating in Central America. He is also Chief Editor of MicroCapital.org, a news and information service for the microfinance community and its investors. Each month, MicroCapital.org publishes the MicroCapital Monitor, the leading industry newspaper. David writes and speaks frequently on microfinance. He has been a quest speaker at many events, including: Microcredit Summit 5+: Panel on Private Investment, Milken Institute Global Conference, United Nations Year of Microcredit Symposium for Wall Street, Chicago Conference on Microfinance, Harvard Social Enterprise Conference, Dartmouth’s Business Sustainability Conference, Wharton’s Conference on Social Entrepreneurship, Stanford’s Social Enterprise Club, Columbia’s Social Enterprise Program and the Net Impact Annual Conference. Through his work with Prisma and MicroCapital, he has been featured or quoted in The Wall Street Journal, the Boston Globe, “All Things Considered,” Reuters and SocialFunds.com. David has been recognized with the Compaq Computer Corporation Leadership Award, the City Year Inspiring Leader Award and the National Social Venture Business Plan Competition award for Best Social Impact Analysis. David has supported many non-profit and for-profit social enterprises in different capacities, including Access Technology Learning Center, Agora Partnerships, Bridges to Business, City Year, Fonkoze, Kiva and National Social Venture Competition. David holds a B.A. with Honors in Political Science from Haverford College.

David Satterthwaite is a Gold author on EvanCarmichael.com
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