Empowering the underserved: interview with the Uganda Microfinance Regulatory Authority

How important is the microfinance sector in Uganda?

The informal sector accounts for 74% of our economy, and it depends largely on microfinance. Uganda has liberal microfinance policies, aimed at allowing the sector to grow and integrate into the formal financial sector system. 

The Uganda Microfinance Regulatory Authority is mandated to regulate, license and supervise all Tier 4 Microfinance Institutions, defined as Savings and Credit Cooperatives (SACCOs), Self Help Groups, Non-Deposit Taking Microfinance Institutions, and Money Lenders.

To date, we have licensed 1802 institutions with an estimated customer base of 17.5 million from the underserved and unbanked population.

How is microfinance promoting social and economic development? 

Microfinance is designed to provide access to loans, savings, and insurance to low-income or otherwise financially underserved individuals. In doing so, we help struggling individuals and communities rise out of poverty. Microfinance has been shown to increase incomes and create jobs, particularly in rural areas.

Microfinance programs often target women, who have historically been excluded from financial services. By providing them with access to credit and training, we empower women and increase their economic and social development.

How do you build member, customer and investor confidence in microfinance?

UMRA developed consumer protection guidelines in 2019 to promote microfinance’s legitimacy. We developed a cloud-based, complaint-handling system that allows the public to log issues relating to licensed institutions.

We also issued Self Help Group guidelines in 2022, with the objective of financial stabilization and building public confidence in savings groups.

The Authority has enabled a conducive regulatory environment for investors to freely operate in the sector, and we can rank performing institutions through prudential and non-prudential supervision where investors are directing funding.

What are UMRA’s priorities for the year ahead?

Issuance of Tier 4 Digital Lending guidelines-2024 as a supervisory tool for institutions using digital channels and fintechs lending.

We will be prioritizing the development of a digital loan shop for Tier 4 institutions. This will benefit the unbanked and underserved population by letting them choose products that meet their needs and which offer competitive interest rates. AFI is invited to support UMRA with this project by conducting a study and scaling up the project to include more features.

Otherwise, we will soon launch the first data switch infrastructure mechanism, which collects credit history reports from our 1802 institutions in order to transmit data to Credit Reference Bureaus under the Central Bank, through a credit information sharing mechanism.

This will increase access to finance, since the underserved will be able to use their credit scores to attain credit, instead of requiring collateral which they often don’t have.  The Authority will greatly appreciate AFI support around awareness campaigns and training on the benefits of credit information sharing for both lenders and borrowers.

You can learn more about UMRA’s work and impact on their website.