Originally Published: July 04, 2005
Source: allAfrica.com, Uganda
Only these three out of over 1,300 (according to Bank of Uganda estimates) MFIs in operation will be authorised to take deposits from clients in accordance with the MDI Act.
Parliament passed the law that regulates the industry in November 2002 and it became effective on July 1 2003.
BoU's Acting Director of Public Relations, Mr Sam Katwere, said unlicensed institutions would have to refund to clients the deposits they have taken since the law does not allow them.
"All unlicensed institutions are required to comply with the law without exception," Katwere said.
"The institutions have options to comply by either refunding the deposits so far accepted or applying for a license from Bank of Uganda if they meet the requirements of the MDI Act. That is the law."
It will be an offense for any MFI to continue taking any deposits.
"Unlicensed microfinance institutions must cease accepting deposits from the public and should stop intermediating deposits or a loan insurance funds," a statement from BoU issued on June 20 said. "Please note that the conduct of unlicensed micro-deposit-taking business after July 1, 2005 shall constitute an offence." The Foundation for International Community Assistance (Finca) MDI Ltd, Pride Micro Finance Ltd, formerly Pride Uganda, and the Uganda Micro Finance Ltd, formerly Uganda Micro Finance Union (UMU) are the only ones that have been licensed.
Finca, one of the leading MFIs in the industry, was the first institution to be licensed in November 2004. Pride and the Uganda Micro Finance Ltd only got theirs on the eve of the deadline on June 30. Katwere said the licensing of MFIs would open the banking industry for competition, which would create efficiency among players to delivery financial services promptly.
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