The Judicial Service Commission in its mandate, has embarked on a sensitization campaign to educate the public on the moneylender interest rates approved by the law.
This comes after a November 18, 2024, decisive move by the government to protect borrowers and regulate lending practices.
Uganda’s Ministry of Finance, Planning, and Economic Development issued a legal notice, No. 21 of 2024, capping interest rates for Tier 4 Microfinance Institutions and money lenders.
The registrar in charge of legal education, public affairs, and research at the Judicial Service Commission, Samuel Mugisa, re-echoed the directive that money lenders were permitted to charge an interest rate of 2.8 percent per month, which amounts to 33.6 percent annually.
“The new money lending regulations, including the capping of interest rates, became effective from the date they were operationalized,” he stated.
According to Mugisa, the borrowers who took loans before these regulations came into force under different terms are required to clear them on the agreed terms.
He emphasized that money lenders are required to maintain detailed records enshrined in the lenders contract and receipts, whether physical or electronic.
“These must be issued to both parties; an acknowledgment ought to be provided clearly stating the amount of the principal and interest paid as well as the outstanding balance,” Mugisa explained.
Mugisa highlighted that the agreement should outline key terms, including the loan amount, interest rate, repayment schedule, penalties for default, and any collateral involved, and should comply with relevant laws and regulations.
He, however, revealed that individual money lenders were operating illegally and not recognized by the law.
“A money lender is a company, not an individual, that is licensed under the tier 4 microfinance institution and money lenders Act, and if an individual is lending money, then they are not a money lender as per the law,” Mugisa stated.
In May 2016, the Tier IV Microfinance Institutions and Money Lenders Act was passed by the Parliament to effectively govern the spectrum of Tier IV financial institutions and money lenders with the objective of protecting the savings of the depositors, limiting predatory lending and unethical practices, and building confidence in the system to promote financial inclusion.
