Bank of Uganda to start regulating SACCOs

The Central Bank of Uganda is gearing up to introduce regulations for the supervision of registered circles, known as Savings and Credit Cooperative Organizations (SACCOs). In a recent interview with CNBC Africa, Ken Agutamba, Chief Strategist at ICS, shared insights on the implications of this impending regulatory framework. The move comes as part of an effort to enhance oversight of the microfinance and money lending sector in the country. Agutamba highlighted that the existing 2003 Act is under review, with the aim of introducing a new law or regulation by 2021. Under the proposed changes, SACCOs with equity exceeding 5.5 billion Ugandan shillings, approximating 1.5 million US dollars, will fall under the direct regulation of the Bank of Uganda. Meanwhile, smaller SACCOs will be overseen by the Microfinance Regulatory Authority. While discussing the market landscape, Agutamba revealed that there are currently around 7,000 registered SACCOs in Uganda, yet only about half of them are active. This underscores the significant demand for financial services provided by SACCOs, with an estimated 18 million Ugandans engaged with these institutions. In comparison, he noted that the number of Ugandans utilizing bank services is far lower, indicating a prevalent reliance on SACCOs for financial solutions. Addressing the timing of the regulatory intervention, Agutamba pointed to the recent launch of the Parish Development Model by the Ugandan government. The initiative aims to alleviate household poverty by promoting production and investment through parish-based SACCOs. The anticipated influx of approximately 10,000 new SACCOs under this model necessitates a robust regulatory framework to ensure compliance and accountability. Responding to queries regarding the reception of the impending regulations, Agutamba highlighted a positive sentiment within the SACCO community and among customers. The move is welcomed as a means of enhancing governance and protecting the interests of both SACCOs and their clientele. By imposing regulatory standards, the Central Bank of Uganda seeks to curb mismanagement and safeguard the financial stability of SACCOs, thereby bolstering trust and attracting potential collaborations with commercial banks. Agutamba stressed that the initiative would not only benefit SACCOs but also facilitate greater accessibility to financial services for Ugandans at competitive rates, fostering economic growth and financial inclusion. The imminent regulatory changes are poised to reshape the financial landscape in Uganda, heralding a new era of transparency and accountability for SACCOs.