News
New Regulations To Restrict Money Lenders from Charging Interest Beyond Six Months
By : Hason Mutunzi Bwambale
Henry Musasizi, the Minister of State for Finance, has told Parliament this afternoon that in the upcoming regulations, money lenders in Uganda will no longer be permitted to charge interest rates beyond a six-month period. This move comes in response to concerns about exorbitant interest rates charged by some money lenders, which often exceed 100% of the loan amount.
Minister Musasizi emphasized the economic implications of capping interest rates for money lenders, stating that it is not conducive to a healthy financial system. However, in order to address the issue of exorbitant interest rates, the Ministry of Finance has decided to implement the six-month limit.
“While acknowledging that interest rates charged by certain money lenders surpass 100% of the loan amount, we recognize that capping interest rates entirely is not the most favorable economic approach,” Minister Musasizi stated. “As we continue our discussions on the matter, one of the conditions we are proposing is that money lenders should not charge interest for more than six months. Once six months have elapsed, the interest should terminate.”
This new regulation aims to tackle the problem of excessive interest rates, which often burden borrowers and hinder their ability to repay their loans. By limiting the duration of interest charges, the government hopes to provide relief to borrowers and promote fair lending practices.
The Ministry of Finance believes that these measures will bring more transparency and accountability to the money lending sector, fostering a healthier financial environment for both lenders and borrowers in Uganda.
The implementation of the new regulations will require proper monitoring and enforcement to ensure compliance by all money lenders in the country. The Ministry of Finance will work closely with relevant authorities to oversee the effective implementation of the six-month interest rate cap.
The move to regulate money lending practices in Uganda is seen as a necessary step to protect borrowers and promote responsible lending. It is expected that these measures will contribute to a more equitable and fair financial system, benefiting individuals and businesses across the country.