Licensed or not? What UMRA's enforcement drive means for SACCOs and their members

The Uganda Microfinance Regulatory Authority (UMRA) has announced that it will begin enforcement operations against money lenders operating without licences, a step that signals a shift in tone for a regulator that has spent much of its short life on sensitisation. For SACCOs, which fall under the same law, the message is unmistakable: a licence is not optional, and the regulator is increasingly prepared to act on that.

UMRA was established under section 6 of the Tier 4 Microfinance Institutions and Money Lenders Act, 2016. Its mandate covers four kinds of institution: savings and credit cooperatives, non-deposit-taking microfinance institutions, self-help groups and money lenders. Under section 36 of the Act, a SACCO may not conduct financial services business unless it is licensed.

The authority began licensing SACCOs in 2021. In a public notice, it acknowledges that some SACCOs continue to operate in contravention of the Act, and it has called on all registered societies to regularise their operations.

Government budget documents give a sense of the scale. UMRA's Ministerial Policy Statement for 2023/24 reports that during 2022/23 it reviewed 1,050 licence applications and licensed 1,002 institutions: 600 money lenders, 55 non-deposit-taking microfinance institutions and 45 SACCOs. Its performance table records a cumulative 3,328 Tier 4 institutions licensed, against a 2021/22 baseline of 2,130.

Those figures underline how small the SACCO share of licensing still is. Money lenders dominate UMRA's register, while thousands of SACCOs formed under government programmes have yet to pass through the system. The same policy statement records that UMRA ran sensitisation workshops with the Microfinance Support Centre to prepare Emyooga SACCOs for licensing across the regions, and seminars targeting more than 450 institutions on licensing and compliance requirements.

UMRA lists its constraints candidly. Chief among them is the absence of a comprehensive database of microfinance institutions in Uganda, which it says makes effective licensing and supervision difficult. It also flags emerging models, such as Islamic microfinance institutions, that will require specialist skills to regulate.

The authority has begun building that evidence base. In 2022/23 it says it collected and analysed data from 659 money lenders, non-deposit-taking institutions and SACCOs, prepared quarterly reports on licensing status and re-engineered its licensing processes through a new information management system.

For a sector of this size, those are early steps. A regulator that cannot yet count all the institutions it is meant to supervise will inevitably focus on the most visible ones first — which is why boards of smaller SACCOs should not mistake a quiet period for permission.

For SACCO members, a licence is the difference between an institution the regulator can inspect and one it cannot. In 2022/23, UMRA says it carried out on-site inspections of 400 newly onboarded institutions, reviewed 500 off-site reports and resolved 70 complaints from borrowers that helped them redeem property and recover excess charges. Unlicensed operators sit outside all of that.

Spot checks across the country identified more than 200 institutions that were instructed to regularise their businesses. UMRA's standing advice to the public is not to transact with unlicensed institutions offering financial services, and its licences run on a calendar-year basis, so SACCOs must renew each year to stay compliant.

The stakes are rising because SACCOs are now central to household borrowing. The 2023 FinScope survey found that SACCOs provide credit to about 3.9 million adult Ugandans, as many as mobile money does.

For boards, the practical checklist is straightforward. Confirm whether the society is licensed for the current calendar year; if not, obtain the application forms from UMRA's website or its offices at Rwenzori Towers in Kampala and begin the process. Keep records, audited accounts and member registers in a state that would survive an inspection.

Boards should also communicate with members. Many people join SACCOs through churches, markets or government programmes without ever asking whether the institution is licensed. A SACCO that can show its licence has a trust advantage that it should use.

Enforcement will inevitably begin with the most egregious money lenders. But the logic of the law applies equally to SACCOs, and the movement is better served by getting ahead of the regulator than by waiting for a knock on the door.