Bank of Uganda cautions against unregulated financial institutions

Arua, Uganda | THE INDEPENDENT | The central bank has cautioned the public against borrowing from unregulated bodies.

Balaam Ssempala, the Deputy Director Deposit Protection Unit in the Central Bank says that in the event of liquidation or closure of such unregulated institutions, the depositor stands a high risk of losing funds without compensation.

He says that most of the mushrooming money lenders exploit desperate borrowers who often end up being cheated through high interest rates. His caution came as the Bank launches a public awareness campaign on the need to use credit reference systems.

But members of the village savings and loan association in Arua expressed mixed reactions at the statement questioning why the Bank has been silent as the public lost money and properties to money lenders. They argue that the regulated financial institutions have a lot of bureaucracies, yet often borrowers need instant cash.

Favorite Draru, a money lender in Arua town says the campaign by Bank of Uganda will not solve the problems which drive the public to the Saccos and money lenders.

Meanwhile, a cross section of borrowers who support the Bank of Uganda’s move to discourage and caution people against dealing with unregulated money lenders commended the idea behind protecting their deposits and being able to report any issues to the regulatory body.

Currently, Bank of Uganda is regulating 24 Banks and Credit Institutions and five micro deposit taking institutions (MDIs) with a total of 10.9 million bank accounts in the Country.

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