In 1999, the Bank of Uganda (BoU) issued a policy statement on Microfinance Regulation and Supervision as a framework for Ugandan microfinance institutions (MFIs), and recognized four tiers of institutions that can do microfinance business in Uganda. The tiered system acknowledged that it may be necessary to regulate different types of institutions in different manners, and institutions can graduate from one tier to another, subject to meeting the regulatory requirements for that tier. At the time, only the first three tiers were directly regulated by BoU: (1) commercial banks; (2) credit (non-bank financial) institutions; and (3) Microfinance Deposit-taking Institutions (MDIs).

The Government of Uganda established a new legal and regulatory framework for the Tier 4 MFIs. This Tier consists of a range of semi-formal and informal financial institutions that were not covered by the 1993 MDI Act. These MFIs are diverse in form and size, including: savings and credit cooperatives (SACCOs); credit-only microfinance non-governmental organizations (NGOs); private businesses and individuals engaged in financial services (including money lenders); and other community-based and informal financial groups, such as village savings and loan associations (VSLAs).

The risks facing poor borrowers and depositors of Tier IV financial institutions prompted the Ministry of Finance, Planning, and Economic Development (MoFPED) to create a legal framework, which effectively governs the spectrum of Tier IV financial institutions with the objective of protecting the savings of the poor depositors, limiting predatory lending practices, and building confidence in the system to promote financial inclusion.

In May 2016, the Tier IV Microfinance Institutions Act was passed by the Parliament. A key provision of the Act is the establishment of the UMRA, which has the mandate to license, regulate and supervise all Tier IV financial institutions.

Uganda Microfinance Regulatory Authority –UMRA is an autonomous government agency.

UMRA is expected to promote a sound and sustainable non-banking financial institution’s sector (savings and credit cooperatives, village saving and loan associations, non-deposit taking microfinance institutions and moneylenders) to enhance financial inclusion, financial stability, and financial consumer protection among the lower income population in Uganda

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