Govt Caps Moneylenders’ Interest Rates to Curb Exploitative Practices
Under the new regulations, moneylenders are prohibited from charging interest rates exceeding 2.8% per month on loans.
The Ministry of Finance, Planning, and Economic Development has set a maximum interest rate of 33.6% per year for moneylenders operating under the Tier 4 Microfinance Institutions and Money Lenders Act.
Legal Notice No. 21 of 2024, signed by Finance Minister Matia Kasaija and published on November 15, 2024, enforces this cap to protect borrowers from predatory lending practices.
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Under the new regulations, moneylenders are prohibited from charging interest rates exceeding 2.8% per month on loans.
This measure seeks to alleviate financial burdens on individuals and small businesses that frequently rely on moneylenders for short-term credit.
The legal notice, issued in consultation with the Uganda Microfinance Regulatory Authority (UMRA), is expected to foster fair lending practices and encourage responsible borrowing within the Tier 4 microfinance sector.
Minister Matia Kasaija highlighted the government’s commitment to creating a balanced financial system. He noted that the interest rate cap is part of broader efforts to streamline Uganda’s microfinance landscape and safeguard borrowers from financial distress.
UMRA has been tasked with ensuring compliance among moneylenders and addressing violations of the stipulated rate. Borrowers are encouraged to report any instances of lenders exceeding the cap to the authority for immediate action.
The Ministry has called on both lenders and borrowers to familiarize themselves with the new regulations to ensure smooth implementation and avoid disputes.
This initiative is seen as a step toward building a more transparent and financially inclusive lending environment in Uganda.
