Microfinance institutions determined to get bank status against stoic finance committee

The team led by Jacqueline Mbabazi, the Executive Director of the Association of Microfinance Institutions of Uganda (AMFIU) wants to leave their current category as microfinance deposit-taking institutions (MDIs) to bank status as they told Parliament's Finance Committee.

Mbabazi said that elevating their status will help curb the current interest rates which are trickling down from commercial banks to the public.

She argued that they have access to the majority of Ugandans who have been sidelined by traditional banking, and they can help them transition.

“When the MDIs were regulated in 2003, by 2007, their performance had tripled, with serving more low-income earners and being able to ensure they have a place where to save and where they can borrow. The MDIs majorly target low-income earners and the economically active poor and vulnerable groups such as the youth, women, people with disabilities (PWDs) and refugees, some of whom have been thrown out of the mainstream conventional banking,” she said.

She said microfinance institutions already adhere to the regulations of the Bank of Uganda to ensure customer deposit safety. She added that their new status will also increase insurance uptake by being able to offer bank assurance.

In response, the Committee chairperson, Keefa Kiwanuka, said the documents the team will produce will be thoroughly reviewed before arriving at a decision.

However, this was not before Paul Omara, the Otuke legislator, and a retired banker, told the team of MDIs that they were reaching beyond their scope. He said the new status would blow a hole in their structures based on the pressure conventional banking would bring down on them.

“In Uganda now, everybody wants to be what they are not. When you call yourself a bank, there are a lot of burdens that come with that, and the number one is operations and credit risk management. Compliance with international standards and structurally within your organizations, you must have departments that will ensure the depositors’ funds are secure. What is the robustness of your credit department and your operations in terms of compliance with international practices?” he questioned.

The team, which included, Shafi Nambobi, the executive director of UGAFODE Microfinance Limited, said they have their audit and necessary documents ready for review.