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UMRA Tier VI Regulation in Uganda

Project Development Objective (PDO)

This project aims to assist the Government of Uganda to establish the Uganda Microfinance Regulatory Authority (UMRA) as a cost-effective regulatory body in line with the Tier IV Microfinance Institutions Act. 

Background

Because of the risks facing poor borrowers and depositors of Tier IV financial institutions, the Ministry of Finance, Planning, and Economic Development (MoFPED) has been working 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. Although UMRA would be an independent agency similar to the Insurance Regulatory Authority and Uganda Retirement Benefits Regulatory Authority, it would come under MoFPED with a board comprised of MoFPED, MTIC and BoU, in addition to private or civil society stakeholders. 

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

Activities / Output

The expected activities include the following:

In establishing the UMRA, 
•  Assess the scope of the regulatory and supervisory needs in line with the mandates of UMRA,
   taking into account the heterogeneous nature of Tier IV institutions; 
•  Advise on the structure/institutional design of the UMRA;
•  Advise on governance in particular provide guidance on the role, function, responsibilities and
   enforcement powers of the new Board for UMRA;  
•  Advise on the coordination framework with other relevant regulatory authorities such as BoU and
   CDC;  
•  Advise on key policies, business processes and system requirements; 
•  Advise on staffing requirements, including any possible additional secondments from BoU,
   competency framework and recruitment process and 
•  Provide staff training and development once recruited

Expected Outcomes

The main expected outcomes of the project are that UMRA is established, having clear organizational structure, principles, responsibilities, policies, business processes and staffing capacity to supervise Tier IV MFIs.