The Support Organisation for Micro Enterprises Development (SOMED), a microfinance firm in the Kibaale District of Uganda was shut down in December last year while police claim they are investigating allegations of extortion, embezzlement and fraud. The company had been offering low-interest loans since 2004.
This event comes less than a month after the central bank in Uganda, the Bank of Uganda (BOU), issued a statement warning that customers in the country’s Savings and Credit Cooperatives (SACCOs) – a type of microfinance institution (MFI) not regulated by the bank – may lose their savings without the BOU being able to intervene or provide compensation for those clients that suffer. As a result, violence erupted at the headquarters of one of the SACCOs under investigation.
This is the latest twist in an on-going story highlighting the dysfunctional microfinance system in Uganda, which has been reported by MicroCapital. So far a number of SACCOs have been investigated by the police and shut down, with public worry about the system leading to satirical skits in the national theater.
However, it is unclear whether SOMED has been registered as a SACCO or is operating as a standard MFI, which means that Uganda’s problems may be expanding beyond the SACCO sector. SOMED is not one of the four MFIs that are currently regulated by the BOU.
In 2003 SOMED reached the shortlist of MFIs applying for the Rural Pro-Poor Innovation Challenge (RRPIC), with its plan to use RPPIC funds to help provide financial services to women in rural areas of Uganda. The RRPIC is sponsored by the International Fund for Agricultural Development (IFAD) in its effort to help the rural poor.
Amy Rennison, MicroCapital writer
Additional Sources:
MicroCapital
https://www.microcapital.org/?p=1531
AllAfrica.com:
http://allafrica.com/stories/200801021259.html
Microfinance Gateway:
http://www.microfinancegateway.org/resource_centers/savings/cgapsavings1/_assessments/_uganda
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