MFIs Want Moneylenders Regulated
Wednesday, October 11, 2006
MICRO-Finance Institutions (MFIs) have asked the Government to check the higher interest rates levied by moneylenders who have threatened the industry.
While MFIs’ interest rates are between 19%-29%, moneylenders’ rates are 30% and above.
Money lending is legal, but requires written contracts between the lender and the borrower.
The moneylender is obliged to keep proper records of accounts.
Unlike MFIs, moneylenders do not require application, processing, monitoring and insurance fees or compulsory savings, yet MFIs require that.
The executive director of the Association of Micro finance Institutions of Uganda (AMFIU), David Baguma, said moneylenders have not reduced the interest rates from 30% because the cost of borrowing (direct financial and transaction costs) is low.
Baguma said restricting the interest rates would reduce financial services.