The Bank of Uganda (BoU) has taken a bold step to regulate large Savings and Credit Cooperative Societies (SACCOs), marking a significant shift in the country’s financial oversight landscape.
The move began with the issuance of a Microfinance Deposit-Taking Institution (MDI) license to EBO Cooperative Savings and Credit Society Limited, a Western Uganda-based SACCO with over 30 years of operation.
Why Regulate SACCOs?
The decision targets SACCOs with voluntary savings exceeding UGX 1.5 billion and institutional capital over UGX 500 million. Approximately 40 SACCOs, primarily in central and western Uganda, meet these criteria.
BoU’s move aims to ensure financial stability, protect depositors, and align SACCOs with other regulated financial institutions.
The Regulatory Framework
Implemented under the Microfinance Deposit-Taking Institutions (Registered Societies) Regulations, 2023, the new rules require large SACCOs to obtain operating licenses from BoU.
This alignment enhances transparency, risk management, and operational stability within the sector.
Stakeholder Engagement and Industry Response
Before implementation, BoU conducted sensitization workshops for SACCO board members and senior management to ensure a smooth transition. However, the move has sparked mixed reactions:
- Supporters: View it as a necessary step to safeguard depositors and enhance sector stability.
- Critics: The Uganda Cooperative Savings and Credit Union (UCSCU) has challenged BoU’s mandate, leading to ongoing legal proceedings.
Implications for the SACCO Sector
The regulation brings several benefits:
1. Enhanced Oversight: Improved monitoring of SACCO operations to ensure compliance.
2. Depositor Protection: Stronger safeguards for members’ savings.
3. Sector Stability: Increased resilience of the SACCO sector.
However, challenges remain, including compliance costs and operational adjustments for SACCOs.
A Pivotal Shift
BoU’s regulation of large SACCOs marks a transformative moment for Uganda’s financial sector.
While the move promises greater stability and protection, continuous dialogue among stakeholders will be essential to address challenges and ensure sustainable growth.
