BoU awaits court decision on regulation of large SACCOs

KAMPALA, September 26, 2023 – The Bank of Uganda [BoU] will not continue with its plans to regulate large SACCOs until court rules on the case lodged by Uganda Cooperative Savings and Credit Union [UCSCU], the apex body of financial cooperatives in the country.

UCSCU ran to court in mid-August 2023 following a BoU notice indicating they were ready to license, regulate, and supervise large SACCOs upon getting a nod from the Ministry of Finance, Planning, and Economic Development.

In a letter dated July 31, 2023, to UCSCU, Ivan Amagaragariho, a director in BoU noted, “We received policy guidance from the Ministry of Finance, Planning, and Economic Development that cleared Bank of Uganda to proceed with the implementation of the large SACCO mandate in May 2023 and accordingly the Microfinance Deposit-Taking Institutions [Registered Societies] Regulations, 2023 were approved, signed off and published in the Uganda Gazette on June 2, 2023.”

BoU considers large SACCOs as those that have voluntary savings in excess of Shs 1.5 billion and institutional capital of Shs 500 million, and these are about 40 in number, mainly found in central and western Uganda.

Such large SACCOs include Wazalendo SACCO, Parliamentary SACCO, Mushanga SACCO, Muhame SACCO, Ankole Farmers’ SACCO, and EBO SACCO among several others which the central bank wants to regulate under the recently enacted Microfinance Deposit-Taking Institutions [Registered Societies] Regulations, 2023.

However, UCSCU through M/S Moriah Advocates wants court to establish whether the Microfinance Deposit-Taking Institutions [Registered Societies] Regulations, 2023 are applicable or valid when Parliament rejected the provisions in the Microfinance Deposit-Taking Institutions [Amendment] Bill, 2022 which sought to bring registered societies under the supervision and regulation of BoU.

UCSCU also wants court to determine whether Section 110 of the Tier 4 Microfinance Institutions and Money Lenders Act, 2016 can be a basis for making the Microfinance Deposit-Taking Institutions (Registered Societies) Regulations, 2023.

Further, UCSCU wants court to determine whether BoU can legally licence, regulate and supervise registered societies under or basing on the Microfinance Deposit-Taking Institutions [Amendment] Act, 2023.

UCSCU in the application still wants court to establish if there is no contradiction between the Tier 4 Microfinance Institutions and Money Lenders Act, 2016 and the Cooperative Societies [Amendment] Act, 2020, as regards licensing, regulating and supervising Registered Societies.

Upon the determination of the issues raised, UCSCU also wants court to issue a permanent injunction restraining the central bank from licensing, regulating and supervising the subject registered societies until Parliament has cured the contradiction by way of an amendment.

UCSCU wants further wants a consequential order issued suspending and/or nullifying the Microfinance Deposit-Taking Institutions [Registered Societies] Regulations SI No. 54 of 2023 and a declaration be made that all SACCOs should be under a single regulator.

However, while speaking last Wednesday in Kampala at the launch of the Coop360 Innovations Awards 2023, organised by the Uhuru Institute for Social Development [TUI] and other partners, the Assistant Director in charge of Microfinance at BoU, Martin Magezi told SACCO leaders in the country that the central bank had halted plans to regulate the targeted SACCOs until court rules on the matter.

Magezi said the central bank had already put in place structures to work out the regulation, and help the big SACCOs develop further.

“The bank [BoU] was ready to start off regulation, as a responsibility to help the sector manage resources better. We shall wait for the court verdict and see how to proceed,” he said.

Magezi said despite the existence of the court case, BoU is engaged in negotiations with key partners in the SACCO sector such as; Uganda Cooperative Alliance [UCA], UCSCU, the Ministry of Finance, and the Ministry of Trade, Industry and Cooperatives [MTIC] to generate a consensus regarding regulation.

“The negotiations would help all of us work together, maintain standards but also safeguard the resources of the savers,” he said.

He also said once court decides, the central bank is ready to abide by the ruling, and would as well expect the opposing side to abide.

https://thecooperator.news/regulating-large-saccos-ucscu-drags-bou-to-court/

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