Government has set 2.8% as the interest rate to be charged by moneylenders per month.
According to the Tier 4 Microfinance Institutions and Money Lenders Bill 2024, moneylenders will only be allowed to charge up to only 33.6% annually in interest rates.
The legal notice about the interest cap was signed and published by the Finance Minister, Matia Kasaija on November, 15.
Section 90 of the Tier 4 Microfinance Institutions and Moneylenders Act 2016 says a minister may in consultation with the authority by notice in the Gazette, prescribe a maximum interest rate which a money lender shall charge.
The law also says a moneylender who charges an interest that is higher than the maximum interest rate prescribed by the minister commits an offence and on conviction, is liable to a fine not exceeding fifty currency points(shs1m) and the court may, in addition to the fine order that the money lenders licence be cancelled and the money lender pays the borrower any money paid in excess as a result of the interest rate charged.
According to Kasaija, the interest rate was reached at in consultation with the Uganda Microfinance Regulatory Authority(UMRA).
Whereas previously moneylenders charged high interest rates which on many occasions saw borrowers fail to pay back the loans and have their security attached, the latest move will save the public from these loan sharks.
President Museveni recently said he had launched a war on moneylenders whom he said are exploitative.
“”Moneylenders are becoming a problem. How can a lending agreement turn into a selling agreement. These money lenders who are causing suicide to our young people, who allows them to operate? Because I wanted to cancel all the loans of the money lenders,” Museveni said recently.
“Why should somebody charge 20% per month.”
