Online money lenders preying on Ugandans
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Online money lenders preying on Ugandans

A key financial sector regulator last evening said it is soon releasing new guidelines in the face of a rise in unlicensed online money lending dealerships through which unsuspecting Ugandans are facing extortionate and illegal interest fees.

Weeks into investigations by Daily Monitor into this potentially multimillion black market rip-off, the Uganda Microfinance Regulatory Authority (UMRA) acknowledged that it is aware of the proliferation of illegal online money lending.

The authority’s executive director, Ms Edith Tusubira, noted that, as a result, they are “very soon” unveiling fresh measures to counter future risks envisaged in the innovation of online lending.  (See UMRA statement – Ed)



“Tier 4 law needs to be reviewed through amendments which target online lending as the digital space continues to demand. UMRA is set to do amendments,” she said in a statement.

Her statement said UMRA has licensed some companies, five of whom run digital lending facilities but the regulator did not confirm whether the lenders we named in our inquiries were amongst the five.

UMRA also did not say why it has not shut down lenders involved in unlicensed business or questionable dealing despite having the power to do so.

Other watchdog agencies in Uganda’s financial sector had earlier raised fears about unregulated online lending and borrowing. They warned that this could be a conduit through which criminals are laundering dirty money across cyberspace in Uganda.

The Financial Intelligence Authorities (FIA) indicated to Daily Monitor that inquiries are quietly underway into the matter.

Without naming names, Ms Esther Aikiriza, the acting head of communications at FIA, revealed on Friday, March 31, that the agency is looking into reports of suspected money laundering by online money lenders.


“I can’t disclose the number now but we [have] received several complaints which we are following up and shall [give an] update at a later date,” she said. “We are wondering how one can give money to someone you haven’t known or met.”

The FIA is Uganda’s national centre for collating financial data, analysis and dissemination of financial intelligence to competent authorities. It was established by the Anti-Money Laundering Act, 2013 and is charged with combating money laundering and countering terrorism financing, among others.

Inquiries by Daily Monitor have confirmed the operations of at least three online money lenders including Fair Credit, RediCash and Mangu Cash. Like several other similar outfits, they run a website but with no known physical address as is required by law.

None of them appear on UMRA’s published list of authorised money lending businesses although sources at Mangu Cash said they are in the process of getting licensed.

Online lenders generally source clients either through sending out unsolicited bulk text messages with tempting offers of quick-fix unsecured loans or unregulated social media advertising, or by word of mouth.

Money is wired directly to an applicant’s mobile money account. No face-to-face contact ever occurs.

Loans between Shs30,000 and Shs150,000 must be paid within eight days, and anything between Shs160,000 and Shs290,000 in 21 days, while Shs300,000 and more are given 30 days.

Failure to pay on time attracts relatively steep daily interest levies, ranging from between two and five percent – rates which may be illegal. Should one default, you are threatened with being reported to the authorities and blacklisted by the country’s Credit Reference Bureau (CRB).


Bank of Uganda licenses CRBs to gather credit information on individuals and companies which is then disseminated to financial institutions. This helps institutions screen loan applications by enabling the lender to sort out prospective borrowers who have defaulted elsewhere.

But lenders are also supposed to abide by the law which, for instance, sets out in Section 84 of the Tier Four Microfinance Institutions and Money Lenders Act, 2016, that money lending businesses must be licensed.

Section 86 of this law states that a money lending contract is illegal and unenforceable if it directly or indirectly provides for the payment of compound interest; or the rate of interest being increased by reason of a default….

“Where a borrower defaults “… on the due date, the moneylender is entitled to charge simple interest on that sum from the date of default until the sum is paid,” Section 86 underlines.

More than two years ago, UMRA’s Tusubira, sounded the alarm over unlicensed money lending to cash-strapped Ugandans struggling with the after effects of the Covid-19 lockdown.

Speaking at the government media centre on August 30, 2021, Ms Tusubira said: “UMRA has noted with concern the mushrooming unlicensed money lenders around the country conducting business in defiance of the Tier Four Microfinance Institutions and Money Lenders Act 2016”.

“We are informing the general public that the Authority has finalised plans to launch enforcement operations against all those operating outside the law,’’ she said.


Among the law’s provisions are mandatory requirements for licensing and prohibitions against the charging of unduly high interest rates, but the Authority is not known to have acted against these faceless lenders this far.

Personal accounts

Late last year, one Mr Cosmas Buni was under pressure to clear rent arrears, having not been paid salary for more than four months.  He was two months behind by November and his landlord in Kibuli (a low-cost Kampala suburb) was breathing down his neck for the unpaid Shs200,000.

Then a workmate tipped him about Mangu Cash. Two months later, his troubles began.  He had received the money via his mobile money wallet. He was only required to download the Mangu Cash App, turn on his cellphone locator function, provide his personal details, and accept all terms and conditions.

“… I qualified for Shs100,000 but when I applied for it, they gave me Shs86,000 [withholding] Shs14,000 as Interest. I was supposed to pay in seven days. For my last transaction, I was supposed to pay back Shs140,000 in eight days which I failed and it’s at this point when problems started,” he said.

“They started calling me at least 10 times a day. In less than two weeks, the money had been increased to Shs187,000 because of the daily fine. They started threatening that they will report me to Bank of Uganda as a ‘bad debtor’ should I fail to pay and with arrests, among others,” he added.

Mr Vincent Nathan Lusambya, a resident of Nansana Lugala in Wakiso District took a quick loan from Fair Credit.


“On December 29, 2022, I received a text message on my phone from Fair Credit that I qualify for their security-free mobile loan. I took the opportunity, and followed their instructions. I downloaded their App then applied for a loan,” he said.

“My initial qualification was Shs78,000, which I gladly applied for, but to my surprise, they only deposited Shs53,000 on my mobile money account. When I asked them why, they told me that they had deducted the interest,” he added.

After he failed to pay when due, “… within two weeks, the money had accumulated to Shs150,000… They told me that if I didn’t pay the top-up interest they would report me to Bank of Uganda as a ‘bad debtor’.  Although I paid their money I now can’t get any loan anywhere”.

Similarly, Ms Shamim Najuka spoke of her equally disturbing experience with Fair Credit.

“They insult, abuse and threaten you. I used to get over 30 calls a day and from different numbers. They could even call me at night,” said Najuka who lives east of Kampala in Bweyogerere and is a student at Kyambogo University.

Daily Monitor has separately seen another ‘threatening’ text message that was sent to Ms Mwajuma Naula in December last year, by Redicash, one of the implicated companies.

It reads: “Dear Redi Cash Client, You have failed to pay your loan after several calls and SMS, We are left with no other option than tag your pictures on all social media platforms and report you as a defaulter. We will also file a record with CRB to block you from accessing loans in any other financial institutions. PAY NOW”


What lenders say

Mr Denis Ssebagala, a customer service officer at Fair Credit, said: “Our loans have four major categories; the one of eight days, 14 days, 21 days and 30 days. We give loans on a daily interest rate of 3.5 percent, meaning if you apply for Shs50,000 count 3.5 percent of Shs50,000 for eight days. That’s around Shs80,000.”

“We calculate everything and give the customer a final amount they are supposed to pay. Since we get emergency numbers of our customers, we try and call them severally. Remember you have borrowed someone’s money without security,” he said.

Mr. Ssebagala confirmed some of Ms. Najuka’s claims and said constant calls are only made to the Client and the emergency numbers in case the client fails to pay in time.

“When applying for our loans, we ask our clients to submit two emergency contacts (people close to the borrower) which we call in case their known phone numbers are not reachable. It’s true we also call some of our clients constantly because that’s is one of the ways we use to recover the money, remember we don’t deal with these people face-to-face so that pressure makes them to meet their loan obligations although some still default,” he said on February 18.

He adds: “Some clients respond to our calls in a rude way, which forces some of our people to also speak in a rude way.”

Asked why they don’t meet clients face-to-face, Mr Ssebagala said: “This is an entirely online business and we don’t see the need for meeting our clients.”

He, however, denied allegations that they report their clients to BoU as bad debtors and said: “That’s why we lose our money  to some defaulting clients.”

An employee at Redi Cash, who only identified herself as Sharon, on February 28, denied that they harass debtors, noting instead that people turn hostile when their debt mounts.

“We don’t force anyone to take up these loans; they take them willingly and after reading everything,” she said.  “There are some people who have been borrowing and when they feel it’s too big they refuse to pay and later call us scams,” she added.


Regulation of online lenders by Uganda Microfinance Regulatory Authority (UMRA)

UMRA is an agency under the Ministry of Finance, Planning, and Economic Development. Uganda Microfinance Regulatory Authority derives its mandate from the Tier 4 Microfinance Institutions and Moneylenders Act, 2016 which provides for functions of the Authority including but not limited to licensing, regulating, and supervising Tier 4 Microfinance Institutions and Moneylenders in Uganda.

The category of institutions under UMRA include Saccos, non-deposit-taking Institutions, Self-Help groups, and money lenders.

1. Uganda Microfinance Regulatory licenses and supervises the digital lender’s companies, not apps which is a form of innovation in the financial sector to deliver financial services to the public.

2. Digital lending being a new innovation, UMRA licensed not more than 15 companies offering online lending out of the 1,515 institutions offering licenses for the calendar year 2022.

3. All online lenders licensed under the Tier 4 Microfinance Institutions and Money Lenders Act, 2016  are required to follow the Regulations of Money Lenders which prescribe interest rates to be charged on monthly basis, not days.

4. Any online lender as a way of conducting know-your-customer due diligence requests for national ID Information where a client will agree on the term and conditions within the online application if they allow to share the information with the institution, however, the client’s information is private following the Data Protection Act,2019.

All licensed online lenders are required to trade in a name issued on the license as prescribed in the regulations and the public is called upon to shun apps with exorbitant interest rates.

The Authority continues to monitor the new developments of online lenders and the risk they pose to the Tier Microfinance sector. The Authority is in process of issuing digital lending guidelines as a measure of the future risks envisaged in online lending.




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