Museveni halts Central Bank directive on Sacco licensing

President Yoweri Museveni has directed the Bank of Uganda (BoU) to halt threats and directives aimed at forcing Savings and Credit Cooperative Organisations (Saccos) to apply for licences, arguing that the Central Bank should limit its role to oversight rather than direct control.

The directive followed a high-level meeting between the President and the leadership of the Uganda Co-operative Savings and Credit Union Ltd (UCSCU) and the Uganda Cooperative Alliance (UCA), which was also attended by Speaker of Parliament Anita Among. According to a January 30 circular issued by the UCSCU chief executive officer, Dr Sylivester Ndiraramukama, the meeting yielded resolutions that could significantly reshape the regulation of the Sacco sub-sector.

In the notice addressed to Sacco chairpersons and managers countrywide, Dr Ndiraramukama said Mr Museveni agreed that Saccos, as cooperative institutions, should not be subjected to regulatory frameworks designed for commercial financial institutions. “The President guided that the Bank of Uganda should only oversee the flow of money in Saccos and not take over control through regulations that do not consider the unique nature of cooperatives,” the notice reads in part. Dr Ndiraramukama also disclosed that the President agreed to extend the current income tax exemption for Saccos, which is due to expire on June 30, 2027. “The President agreed that Saccos should not be taxed.

The income tax exemption for Saccos will be extended,” he said, describing the decision as a boost to financial inclusion efforts. Saccos fall under Tier 4 Microfinance Institutions and are regulated and licensed by the Uganda Microfinance Regulatory Authority (UMRA), a statutory body established under the Tier 4 Microfinance Institutions and Money Lenders Act, 2016. Section 36 of the Act provides that a Sacco shall not conduct financial services unless licensed by UMRA, a provision that has, in recent months, triggered warnings to unlicensed Saccos to halt operations or regularise their status. However, UMRA officials yesterday said they would align their actions with both the law and the President’s guidance.

UMRA executive director Edith Tusubira said the Authority would make necessary adjustments aimed at improving the Sacco sub-sector while maintaining regulatory oversight. “We shall continue following the law, but we also recognise that the President’s word is law. Adjustments will be made, with the ultimate goal of making the Sacco sub-sector better,” Ms Tusubira said. In his 2021 audit report, former Auditor General John Muwanga revealed that 6,326 Emyooga Saccos were operating without licences but had nonetheless received government funding through the Microfinance Support Centre. He warned that operating without licences exposed members to risks of poor governance and loss of savings, adding that UMRA could not enforce compliance in such cases.

More recently, Auditor General Edward Akol reported that by December 2022, government had released Shs3.2 trillion to 10,589 Saccos under the Parish Development Model. Of this amount, Shs2.7 trillion had been disbursed. However, only Shs9.3 billion had been recovered by the time of the audit, despite the programme being designed as a revolving fund, with beneficiaries expected to start repayment within two years. Last week, President Museveni urged all Ugandans to join their parish Saccos to benefit directly from the PDM, which is the government’s flagship poverty alleviation programme.

The President also revealed plans to increase PDM funding to between Shs300 million and Shs400 million per parish in urban areas, citing the higher population density in towns. “In the towns, we may have to put up to Shs300m or Shs400m per parish because homes are many. But even in rural areas, we can finish all homes in three years if everyone joins the Saccos,” Mr Museveni said, warning that parish chiefs who frustrate the programme would face arrest and prosecution. Dr Ndiraramukama said a stakeholders’ meeting bringing together Sacco leaders would be convened by Speaker Among to harmonise a fair and enabling regulatory framework for the sector. “These outcomes reaffirm government’s commitment to strengthening financial inclusion and protecting community-based cooperative institutions,” he said.