Microfinance institutions' minimum capital requirement set at sh5bn

Parliament has set the minimum capital requirement for Microfinance Deposit-Taking Institutions (MDIs) at shillings five billion.  

The new threshold is contained in a statutory instrument on the revision of the minimum capital requirements presented to the House following a harmonisation process by the Committee on Finance, Planning and Economic Development.  

The chairperson of the committee, Amos Kankunda who presented the report on Thursday, August 17, said there is a need for a legal regime that enables a majority of microfinance institutions to mobilise deposits to enhance financial inclusion. 

“To ensure equity among MDIs and aspiring Tier 4 institutions, the minimum paid-up cash capital requirements should be based on the size of the balance sheet of the institution,” said Kankunda. 

The majority of such institutions operate under Tier 4 like SACCOs and are not legally allowed to take deposits.  

The current Tier 3 (MDIs) institutions in Uganda include Pride Microfinance Limited, FINCA, UGAFODE and EFC Limited.  

Kankunda added that the Bank of Uganda should annually review the proposed instrument within one year to determine the right percentage of the minimum capital requirement.  

Tier 4 microfinance institutions under the control of the Central Bank as per section 110 of the Tier 4 Microfinance Institutions and Money Lenders Act, 2016, will be exempted from the statutory instrument. 

The Opposition in Parliament had requested that the money be set at sh2b while the government set it at sh10b.