Bank of Uganda gives SACCOs March 2027 licensing deadline

The Bank of Uganda has warned savings and credit cooperative societies (SACCOs) that have not obtained operating licenses to complete the process before March 31, 2027, saying the deadline will not be extended.

The warning comes as the central bank intensifies efforts to bring eligible SACCOs under its regulatory framework, with licensing intended to strengthen financial management, protect members’ savings and improve access to affordable credit.

This call to action was issued by David Kalyango, the Bank of Uganda’s executive director for supervision and regulation, during the handover of licences to four SACCOs: CBS PEWOSA Nsindika Njake Eyeeterekera Savings and Credit Cooperative Society Limited, Mateete Savings and Credit Cooperative Society Limited, UNBS Staff Co-operative Savings and Credit Society Limited, and Kibaya Youth Development Cooperative Savings and Credit Society Limited.

Kalyango said the approvals brought the number of SACCOs licensed by the Bank of Uganda as registered societies to 10, while more than 35 applications were in the final stages of review.

“I strongly encourage all eligible unlicensed SACCOs to follow the example demonstrated by the SACCOs here today by completing the licensing process before the March 31, 2027, compliance deadline, which will not be extended,” Kalyango said.

The licensing exercise is being undertaken under the Microfinance Deposit-Taking Institutions Act, Cap. 58, and the Microfinance Deposit-Taking Institutions (Registered Societies) Regulations, 2023, with the framework providing for the regulation of eligible SACCOs while allowing them to retain their cooperative business model.

“As a caution: Money speaks only one language; if you save me today, I will save you tomorrow. These licences also bring greater responsibility. Boards must provide effective oversight; management must maintain adequate capital and liquidity buffers, effectively manage credit risk, submit accurate returns to support regulatory oversight and protect members’ interests. Risk management and prudent management must be fully embraced,” Kalyango added.

Mackay Aomu, the director of the NonBanking Financial Institutions Department at the Bank of Uganda, said the regulatory process was intended to support SACCOs rather than threaten their operations, adding that the central bank had adopted a gradual approach to help institutions transition from self-regulation.

“We are, therefore, here to support SACCOs. Regulation should not be interpreted as a threat to your operations,” Aomu said.

He said SACCOs played an important role in social and economic transformation because of their presence at the grassroots, where they mobilize savings and provide financial services to communities.

However, he noted that handling members’ money required minimum controls to ensure accountability and protect public confidence in the institutions. Aomu said the central bank understood that SACCOs had traditionally operated under self-regulation and was taking their circumstances into account as they adjusted to the new regulatory requirements.

He said the institutions would be given transition periods, with some requirements subject to timelines of six months or one year, to allow them to learn and comply.

The central bank’s approach, he said, should not be confused with an immediate threat of closure, as the regulator would provide guidance and timelines for institutions to address identified weaknesses.

Aomu said effective regulation was necessary because SACCOs were interconnected with the banking system, meaning problems affecting large institutions could have wider implications for financial stability and the public.

He urged SACCO leaders to establish sound governance structures, including boards and committees, and appoint competent managers to oversee finance, credit and other key functions.

He warned against the informal handling of institutional funds, saying financial decisions should be guided by clear policies and authorization procedures rather than individual discretion “Proper governance, accounting and financial reporting would improve accountability, strengthen members’ confidence and make SACCOs more attractive to banks, government agencies and development partners.

Well-managed SACCOs could also qualify for more favorable borrowing terms from commercial banks because lenders would have greater confidence in their financial records and internal controls,” Aomu added.

Kalyango urged SACCOs to retain part of their surpluses instead of distributing all their earnings, saying this would increase the funds available for lending and support the provision of more affordable loans.

Aomu also warned SACCO members against spending their entire savings and earnings when they receive their share from village savings groups and other cooperative arrangements, and instead encouraged them to reinvest in their institutions to build their financial base and increase the resources available for lending.

“As SACCOs accumulate more funds, they can lower lending rates while continuing to reward members who save with them, and narrowing the difference between lending rates and deposit rates consistent with the broader objective of making financial services more accessible and affordable,” Aomu added.

Kalyango also highlighted the role SACCOs could play in extending financial services to households, farmers, traders and small businesses that often face difficulties accessing affordable credit, as SACCOs regulated by the central bank were eligible for subsidized financing through the Agricultural Credit Facility and the Small Business Fund, which support agriculture and small businesses.

He urged eligible institutions to take advantage of the funding opportunities to expand access to credit and also to integrate environmental, social and governance considerations into their operations to ensure their growth remained sustainable and inclusive.

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