Editor's Note: Govt should regulate MFIs

Bank of Uganda’s warning that the public should be careful when dealing with unlicensed microfinance institutions, has only exposed weaknesses of regulation in our financial environment but not absolved BoU from the blame.
The warning should be treated as a misplacement of responsibility by BoU.

Of course the question that arises is who then regulates and ensures that the mushrooming savings and credit cooperative societies (Saccos) and MFIs do not cheat unsuspecting customers? We all expect BoU to come up with stringent measures on the operations of these institutions and not merely warning the public.

The Prosperity for All programme is giving rise to more Saccos that must be regulated under some unified law unfortunately many of these Saccos and MFIs, are registered and operate as NGOs or associations thus falling in a different constituency for regulation. 

It is imperative however that given their involvement in either taking deposits or giving out money BoU must regulate their activities to protect the country from thieves.

That notwithstanding, microfinance institutions have a role to play in the economic development of the country. But the reason for their almost unregulated existence says something about an abundance of demand for easy-to-access and unsecured credit.

Many credit seekers have been conned by witty money lenders under the banner of an association or an NGO.
The government should come up with a unified regulatory framework to restore sanity in the microfinance industry where whoever trades in money should be ‘cleaned’ before allowed to do business.