KAMPALA, UGANDA | NOW THEN DIGITAL — President Museveni announced on Thursday that he has instructed the Minister of Finance to issue a statutory instrument within two weeks addressing the interest rates imposed by money lenders.
Expressing concern about the exorbitant interest rates charged by money lenders in Uganda, which can reach up to 20 percent per month and have been linked to youth suicides, President Museveni emphasized the need for action.
During a meeting with the NRM Caucus at Entebbe State House on September 28, President Museveni declared, “I directed the Minister for finance to put out a statutory instrument within two weeks on the interest paid to money lenders in accordance with the inflation which the NRM will support.”
He added, ”These moneylenders who are causing suicide to our young people, who allows them to operate? Why should someone charge 20% interest on a loan per month? This must stop.”
These remarks come as concerns rise over the exploitative practices of fraudulent money lenders and microfinance institutions, which target unsuspecting Ugandans with high-interest loans and aim to seize collateral from defaulters.
Approximately 1,500 money lenders have been registered by the Uganda Microfinance Regulatory Authority (UMRA), according to the government. President Museveni has previously expressed dismay over the absence of laws regulating lending rates imposed by money lenders.
In July of this year, Speaker of Parliament Anita Among threatened to terminate Memorandums of Understanding (MoUs) that certain money lenders had with members of the 11th Parliament due to excessively high interest rates, which she deemed as harassment of MPs.
Bank of Uganda data indicates that lending rates have averaged around 21 percent since the early 1990s. These high rates are primarily driven by the significant overhead costs incurred by financial institutions, which necessitate higher interest rates to offset these expenses, as argued by experts.