Microfinance regulator warns against quick loans from unregulated lenders

UMRA warns Ugandans against using unregulated online lending apps, citing risks of predatory practices and data privacy violations.

The Uganda Microfinance Regulatory Authority (UMRA) has issued a stern warning about the risks of using unregulated online money lending applications.

In a statement released on Thursday, UMRA expressed concern over the rise of unauthorized entities offering loans through mobile apps.

These operations violate the Tier 4 Microfinance Institutions and Money Lenders Act, 2016, and the new Tier 4 Microfinance and Digital Lending Guidelines of 2024.

UMRA, which regulates Tier 4 Microfinance Institutions in Uganda, identified several illegal mobile apps.

Some of these apps include Flypesa, Banana App, Loango, Nile, Gloan App, Boom Loan, and Mpacash.

UMRA cautioned the public against transacting with these unauthorized lenders.

“These entities use mobile apps and social media to lure the public into borrowing,” UMRA warned.

They noted that these activities breach consumer protection laws and misuse consumer data privacy.

UMRA emphasized that these practices violate the 2024 Digital Lending Guidelines.

The authority urged Ugandans to avoid engaging with these lenders.

In recent years, Uganda has seen a surge in quick loan apps.

These platforms offer a new way for people to access credit, often bypassing traditional banks.

For many Ugandans, particularly small business owners, these apps have become essential.

However, the convenience they offer comes with significant risks.

Many of these platforms operate outside regulatory oversight.

Unlike banks, they are not subject to financial regulations meant to protect consumers.

As a result, predatory lending practices have thrived.

These apps often offer quick loans with minimal documentation.

While beneficial in emergencies, the consequences can be severe.

Borrowers have reported receiving less money than promised.

For example, a borrower might request 100,000 shillings but receive only 50,000.

Despite this, they are required to repay the full 100,000, often with interest rates exceeding 100%.

Furthermore, these loans are often accompanied by aggressive collection methods.

Borrowers have reported harassment, including relentless phone calls and public shaming.

In some cases, lenders have sent defamatory messages and personal photos to the borrower’s contacts.

UMRA’s warning highlights the dangers of these unregulated lending platforms.

The authority advises Ugandans to seek loans only from licensed and regulated institutions.

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