Introduction to the New Regulatory Framework for Saccos in Uganda
The Bank of Uganda (BoU) has introduced a new regulatory and licensing framework specifically for large Savings and Credit Cooperatives (Saccos) across the country. This initiative is aimed at ensuring greater financial stability and protecting the interests of members who entrust their savings to these institutions.
The framework is based on the Microfinance Deposit-Taking Institutions (MDI) Act, Cap. 58, and the MDI (Registered Societies) Regulations, 2023. These legal instruments provide the foundation for the regulation of Saccos that meet certain size and financial thresholds. The central bank emphasizes that this measure is essential for maintaining a secure and transparent cooperative financial system in Uganda.
Key Requirements for Licensing
Under the new framework, only Saccos that hold voluntary savings above Shs1.5 billion and have institutional capital exceeding Shs500 million—this includes retained earnings and reserves—are required to obtain a license from the BoU. Operating without a license is considered illegal and could result in legal consequences.
To apply for a license, eligible Saccos must first register with the Registrar of Cooperatives under the Ministry of Trade, Industry, and Cooperatives. Once registered, they can submit their license applications to the central bank. The BoU is obligated to make a decision within six months of receiving complete documentation.
Benefits of Being Licensed
Licensed Saccos will enjoy several advantages that contribute to their long-term sustainability and member trust. These include:
- Enhanced protection of members’ deposits through the Deposit Protection Fund.
- Access to additional funding sources, both from the government and external investors.
- Improved governance and risk management practices.
- Inclusion in the Credit Reference Bureau system, which helps in assessing creditworthiness and reducing lending risks.
Compliance and Operational Standards
The BoU has also outlined expectations for Saccos to maintain high standards of operation. They are advised to keep proper financial records, train directors and staff in governance and risk management, and ensure ethical lending practices. These measures are crucial for maintaining compliance and fostering a culture of responsibility within the cooperative sector.
Financial Obligations for Saccos
In addition to the operational requirements, Saccos must also meet specific financial obligations. These include:
- An application processing fee of Shs100,000.
- A one-time license fee of Shs500,000.
- An annual renewal fee of Shs500,000, which must be paid by January 31 each year.
These fees are designed to cover the administrative costs associated with the licensing process and ensure that only well-managed Saccos are granted licenses.
Support and Collaboration
The BoU is working closely with relevant ministries and agencies to provide support to large Saccos during the transition to the new regulatory framework. The central bank believes that this initiative will promote transparency, sustainability, and public confidence in Uganda’s cooperative financial system.
Conclusion
The introduction of this regulatory framework marks a significant step forward in strengthening the cooperative financial sector in Uganda. By setting clear standards and offering benefits to compliant Saccos, the BoU aims to create a more stable and trustworthy environment for members and stakeholders alike. As the implementation of this framework progresses, it is expected to bring about positive changes in the way Saccos operate and serve their communities.