Money Lenders Push for Fair Interest Rates, Warn Against Black Market Lending

By BM

The Money Lenders Association of Uganda (MLAU) has renewed calls for government support and fair regulation of interest rates, citing concerns that current policies unfairly target money lenders while ignoring other financial institutions.

Speaking at the MLAU Annual General Meeting in Kampala on Wednesday, President Jonan Kandwanaho highlighted the association’s priority issues for the year, including contesting the government-mandated 2.8% interest rate.

“Uganda is a free market economy. Yet, the government is dictating the rate at which we should lend, even though we source our own capital,” Kandwanaho said.

He noted that lending at 2.8% is unsustainable given operational costs, licensing fees, and capital expenses. “If I borrow money from the bank at 2% per month and lend at 2.8%, it’s not tenable. We need rates that reflect real costs and allow for sustainable operations,” he added.

Kandwanaho stressed the role of money lenders in promoting financial inclusion, particularly for the over 70% of Ugandans who are unbanked.

“Most of these are business people who cannot wait months for a bank loan. They need capital to clear consignments and run their businesses, and that’s why they come to us,” he explained.

He warned that continuing to push artificially low interest rates could drive borrowers to the black market.

Another key focus for MLAU this year is raising awareness about the role of formal money lenders and encouraging membership in the association.

Kandwanaho noted that while 1,500 lenders are licensed in Uganda, only 200 are active members of the association. “No one else is going to fight for us. Through the association, we can speak as one voice and influence policies that favor our sector,” he said.

General Secretary Medard Muganzi added that money lenders are often unfairly portrayed in the media and public discourse. “There is a perception that money lenders are bad people. The fact is, we are legal operators, paying taxes and employing people. We are doing business to serve the population,” he said.

Muganzi highlighted that digital lenders and telecom companies often charge higher interest rates ranging from 7% to 11% yet money lenders are the only ones restricted to 2.8%.

To strengthen the sector, the association is standardizing loan documents, encouraging corporate governance, and seeking cheaper sources of capital.

Muganzi explained that unlike SACCOs or banks, money lenders do not have easy access to government-backed capital, making compliance with the current interest rate unrealistic.

“Angel investors are willing to invest, but they require structured businesses with proper governance and accountability,” he said.

The association has also established a secretariat in Kampala to serve members’ interests and provide support for licensing, information, and capacity building.

Regional representatives from Central, Eastern, Northern, and Western Uganda will help mobilize more members and extend the association’s reach.

Edith Tusuubira, former Executive Director of the Uganda Microfinance Regulatory Authority (UMRA), now part of the Ministry of Finance’s Department of Microfinance and Regulation, assured the public that licensing and oversight remain in place despite institutional changes. “The minister has signed off all licenses for 2025. Those who haven’t picked up their licenses can do so at the former UMRA offices,” she said.

Tusuubira noted that the regulatory transition is over 80% complete and emphasized the government’s commitment to supporting money lenders.

The MLAU is awaiting a final court ruling on the 2.8% interest rate, and Kandwanaho expressed optimism about the outcome. “We have all the evidence to back up our case. Other lenders are charging much higher rates, yet we are being singled out. We hope the court will recognize this disparity and rule in our favor,” he said.

The association continues to advocate for policies that recognize the essential role of money lenders in Uganda’s economy, particularly in serving unbanked populations and supporting small and medium enterprises. (For comments on this story, get back to us on 0705579994 [WhatsApp line], 0779411734 & 041 4674611 or email us at mulengeranews@gmail.com).