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Microfinance high interest rates

microfinance high interest rates

By John Odyek

The interest rates charged by microfinance institutions ranging from 24% to 36%, are high.

“The interest of 2% to 3% per month is on the higher side, limiting the outreach of microfinances. Only two million Ugandans access microfinance services and yet about 10 million need financial services from these institutions,” said David Baguma, the head of the Association of Microfinance Institutions (AMFIU).

Baguma said access to financial services provided by microfinance institutions, including commercial banks, stands at 60%.

“About 40% of Ugandans are not served by any financial institution,” Baguma said.

The finance ministry and AMFIU are organising a three-day conference to find solutions to high interest rates and low access levels to financial services.

The conference started today at Hotel Africana in Kampala.

“The objective of the conference is to provide a platform for microfinance stakeholders to

discuss pertinent issues and agree on new strategies of deepening and increasing access to financial services,” said state minister for microfinance Caroline Amali.

Amali said the major platform that has discussed the issues affecting microfinance has been the microfinance forum, which is spearheaded by the Ministry of Finance. She, however, added that the forum is limited to the number of people who participate.

The commissioner of microfinance, Henry Mbaguta, said the conference aims at expanding the discussion platform to include client protection, innovations in agriculture financing and youth financing models.

Other topics are designing products for the mass market, social performance monitoring and microfinance regulation.

Financial experts say many Ugandans need financial services from microfinance institutions, especially loan facilities, because they can borrow small amounts unlike in commercial banks.

The industry can help solve unemployment problems and create incomes for individuals and households.

Category: Payday loans

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