Cabinet has adopted the proposed changes in the Microfinance Deposit-Taking Institutions-MDIs Act 2003. According to the proposed changes, MDIs will now offer all the services offered by other banks, which has not been the case.
The Minister of Information and National Guidance, Chris Baryomunsi, communicated the government’s decision in a media briefing at the government-owned media center, saying the changes are aimed at helping MDIs serve Ugandans better.
He also says that once approved, MDIs will be referred to as microfinance banks and will be allowed to offer, among others, Islamic banking, agent banking, and bank assurance services.
As of July 2017, Uganda had five regulated MDIs, including Finca Uganda, Pride Microfinance, UGAFODE Microfinance, EFC Microfinance, and YAKO Microfinance, all regulated by the Bank of Uganda.
They offered limited services compared to commercial banks, like underwriting and placement of securities, offering cheques, dealing in foreign currency, and transacting on computer networks or electronic commerce.
According to the minister, this cabinet decision will help in widening the scope of financial inclusion to as many Ugandans as possible. He adds that another amendment is to allow MDI’s access to the Credit Reference Bureau, to which it has been restricted by law;
Credit Reference Bureaus facilitate credit information sharing among financial institutions. In this process, lenders and other credit providers submit and share information about borrowers’ and repayment habits. The reports from this bureau help guide lenders to make informed lending decisions.
With these amendments, MDIs will also get access to this information for smooth and improved operations. They will also allow for new developments in the microfinance industry, as well as integrate it with other financial laws.