Minister of State for Microfinance meets AMFIU members
| Print |
AMFIU hosted the Minister of State for Microfinance, Hon. Kyeyune Haruna Kasolo, at AMFIU office. During the visit the minister met AMFIU members to sensitize them about the Tier 4 Microfinance Institutions and Money Lenders Act 2016 that was signed by the President. In his address he cautioned microfinance institutions and SACCOs from over charging their clients. “Some of you have opted to cheat your own clients by charging high interest rates and other charges that are not declared at the time of borrowing”
In his remarks the president of AMFIU, Mr. Twamuhabwa highlighted the sector challenges as follows:
- Cost of funds. The interest rate charged by financial institutions is largely dependent on macro-economic factors like the Central Bank Rate (CBR) and the inflation rate. When these rise, the general interest rate also rises and clients complain that they are being cheated.
- Lack of sources of loan fund capital. Most sources of capital available are short-term and from commercial sources which makes it difficult for MFIs/SACCOs to provide affordable long-term loans to their client
- Taxation. MFIs/SACCOs are heavily taxed and yet they are largely involved in development work whose returns are minimal. They have to pay income tax of 30% like any other business and the stamp duty has been increased from Uhs.5,000 to 10,000 on each loan, including repeat loans. These costs trickle down to the client who end up feeling cheated.
- Poor savings and credit culture among the people. This has led to high default rates and a limited legal system where defaulters can be prosecuted. As a result, several MFIs/SACCOs are collapsing.
- Low skills levels of human resources, especially among the SACCOs. This is mainly caused by the inability of SACCOs to attract skilled staff due to less competitive salaries among the SACCOs, as a result, affecting overall organisational performance.
- Multiple borrowing among clients: This has led to a vicious circle of client over-indebtedness and high default rates. It is made worse by the fact that Tier 4 institutions can not subscribe to the Credit Reference Bureau.
- Poor reporting and performance monitoring among the MFIs/SACCOs, with various challenges in terms of cost and functionality of the available reporting software.
In his response the Minister pledged support to the sector to ensure that all excluded people access financial services.