KAMPALA, January 7, 2026 — The Bank of Uganda’s [BoU] bid to license and regulate large Savings and Credit Cooperative Organisations [SACCOs] in the country has suffered a setback after the Ministry of Trade, Industry and Cooperatives [ MTIC ] declined to act on a request to compel the affected SACCOs to apply for licences from the central bank, or face de-registration.
Section 6[2] of the Microfinance Deposit-Taking Institutions [MDI] Act, Cap 58, together with Regulations 2 and 4 of the Microfinance Deposit-Taking Institutions [Registered Societies] Regulations, 2023, require all registered societies or SACCOs with voluntary savings exceeding Shs 1.5 billion and institutional capital above Shs500 million to seek a licence from the BoU.
According to BoU, 99 SACCOs met this threshold as of June 2023 and are therefore operating as unregulated financial institutions. However, only three SACCOs have so far applied to be regulated by the central bank due to the confusion caused by the three regulatory entities/laws.
In a letter dated December 19, 2025, addressed to the Permanent Secretary at MTIC, BoU Executive Director Supervision and Regulation, David L. Kalyango stated that SACCOs that fail to register with BoU should be de-registered by the Registrar of Cooperatives.
“SACCOs are categorised as financial institutions. As such, the continued operation of large SACCOs in contravention of the MDI Act, Cap 58 is likely to adversely affect the assessment of Uganda’s level of effectiveness for compliance with AML obligations regarding regulation of market entry,” Kalyango wrote.
He added that, given the Registrar of Cooperatives’ mandate, MTIC should compel all eligible SACCOs to apply for a BoU licence in line with the 2023 regulations, warning that failure to do so would warrant de-registration.
However, MTIC has rejected the request. In a response dated December 30, 2025, addressed to the Solicitor General and referencing Kalyango’s letter, MTIC Permanent Secretary Lynette B. Bagonza described Uganda’s SACCO sector as “nascent, highly complex, to a significant extent political, and deeply rooted in the socio-economic fabric of our communities”.
Bagonza acknowledged BoU’s concerns, particularly regarding enforcement of the law, protection of members’ savings and the potential implications for Uganda’s evaluation under the Financial Action Task Force [FATF], Anti-Money Laundering [AML], Countering the Financing of Terrorism [CFT] and Countering Proliferation Financing [CPF] obligations under the Anti-Money Laundering Act, Cap 118, and international best practice.
Nevertheless, she argued that the sector requires a more nuanced regulatory approach.
“While the Bank of Uganda’s position on enforcement of the law is legally sound, MTIC is of the considered view that the SACCO sector is nascent,” Bagonza said. “From the regulatory perspective, therefore, the sector needs to be approached and managed with a nuanced appreciation of its unique character.”
She noted that SACCOs are self-owned, self-managed and self-governed institutions whose members directly bear the risks and benefits of their operations, and called on government, BoU and other stakeholders to interrogate the underlying reasons for resistance to, and low compliance with, the MDI Act.
Bagonza further pointed to what she described as a “complex and somewhat conflicting” regulatory framework governing SACCOs, involving at least three laws and multiple regulators.
“This multiplicity of laws and overlapping jurisdictions has created significant confusion within the sector,” she said, adding that MTIC believes the regulatory uncertainty requires urgent harmonisation.
She also cited Civil Case No. 0130 of 2024, filed by the Uganda Cooperative Savings and Credit Union Ltd [UCSCU], the national umbrella body for SACCOs, which is challenging BoU’s regulatory authority in court.
“To the Ministry’s knowledge, the court is yet to render its decision. This unresolved regulatory environment and legal ambiguity is, in our assessment, a significant contributing factor to the low licensing uptake,” Bagonza said, noting that only three SACCOs have been licensed by BoU to date.
“In the prevailing circumstances, I am constrained from honouring the Executive Director’s request to compel all eligible SACCOs to apply for a Bank of Uganda licence or face de-registration,” she stated, warning that such action could trigger serious socio-economic and political repercussions, including destabilisation of member-owned financial institutions that serve large sections of the population.
As an alternative, Bagonza proposed a collaborative approach, describing the matter as one of national, regional and global importance. She recommended that the Attorney General convene a high-level meeting involving relevant ministries, BoU, the Registrar of Cooperatives, UCSCU and other stakeholders.
The objective, she said, would be to provide clear guidance or develop a roadmap for a comprehensive review, harmonisation and resolution of the fragmented and conflicting regulatory framework governing SACCOs.
“The Ministry remains hopeful that this approach will facilitate an amicable resolution of the regulatory impasse without resorting to extreme measures,” Bagonza said. “It will help avoid the risks associated with forceful enforcement actions or the mass de-registration of large SACCOs, which could destabilise the sector and have adverse socio-economic consequences.”
Flashback
Until 2016, SACCOs were registered and regulated under the Cooperative Societies Act, Cap 112, administered by the Registrar of Cooperatives under MTIC. Following a significant growth in number and size of SACCOs, government introduced a differentiated regulatory approach. Parliament enacted the Tier 4 Micro Finance Institutions and Money Lenderss Act, 2016, under which small SACCOs are licensed and regulated by the Uganda Microfinance Regulatory Authority [UMRA] whose function was taken over by the Finance ministry under the broader rationalization of government agencies, while large SACCOs were placed under the licensing authority of BoU pursuant to the MDI Act, although this is contested.
In 2020, Parliament amended the Cooperative Societies Act, Cap.112, and the Cooperative Societies Amendment Act, 2020, was enacted. This legislation also introduced a number of fundamental provisions in Uganda’s SACCO sector, which further complicated the already unclear regulatory environment. The two legislations were later consolidated into one; Cooperative Societies Act. Cap 107.
The above various frameworks have in effect resulted in SACCOs being regulated under three different legal entities namely the Cooperative Societies Act, Cap.107, implemented by the Registrar of Cooperatives under MTIC; the Tier 4 Micro Finance Institutions and Money Lenderss Act, 2016, administered by the Microfinance Regulation Department under the Finance ministry; and The Microfinance Deposit-Taking Institutions Act, administered by the BoU.
https://thecooperator.news/bou-awaits-court-decision-on-regulation-of-large-saccos/
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