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Ugandan Government to Set up Laws for Regulating its Microfinance Sector

Guest post by: David Satterthwaite

Article Overview: During the 2007 Citigroup Micro-entrepreneurship awards ceremony in Kampala on January 10, 2008, State Minister for Microfinance, Caleb Akandwanaho announced that a new law regulating the activities of microfinance institutions will take effect in June 2008. The law is meant to bring an end to corruption in Uganda’s savings and co-operative organizations (SACCOs) following dozens of complaints from customers claiming to have been fleeced of their savings, and police investigations in September 2007 of four savings and co-operative organizations (SACCOs) suspected of fraud, including the suspension of The Support Uganda Savings and Cooperative Society, and arrests of SACCO heads.

Ugandan Government to Set up Laws for Regulating its Microfinance Sector

Currently, SACCOs are not regulated by the government and are the only financial institutions which do not have to be licensed by the Bank of Uganda to take deposits. There are around 500 existing SACCOs of which 300 are active. Most of these are recent developments of the “Prosperity for All” program (Bonna Bagaggawale) created during the 2006 Ugandan elections and launched in February 2007 as an all encompassing program aimed at boosting the country’s economy through measures including microfinance, increased production, agroprocessing and marketing.

The EU, which has supported the microfinance sector in Uganda since 1999, has recently contributed assets worth USD 176,470 to be used toward the implementation of a national policy to develop and regulate SACCOs. The Delegation of the European Commission to Uganda has urged the Ugandan government to develop a Savings and Credit Cooperative Organizations (SACCOs) Act and an independent regulatory body to guarantee their independence.

The Uganda Cooperative Savings and Credit Cooperative Union has been designated by the government to lead in the development of SACCOs under the new regulations effective as of June 2008. The government plans to have one thousand active SACCOs spread over every sub county, providing access to microfinance services throughout the country. The new regulations are intended to protect member savings and generate confidence in the microfinance sector. Further details are currently unavailable.

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Article Tags: assets, bank of uganda, confidence, cooperative organizations, cooperative savings, cooperative union, delegation of the european commission, economy, european commission, financial institutions, implementation, independent regulatory body, measures, member savings, microfinance sector, prosperity, recent developments, saccos, ugandan elections, ugandan government



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