FDC Warns Money Lending Debt Trap Signal Government Failure

Ugandans are increasingly being pushed into predatory money lending and costly asset-financing schemes because of limited access to affordable credit, the Forum for Democratic Change (FDC) has warned. The party says the resulting debt trap is forcing some borrowers to risk losing their land, homes, livestock and motorcycles, while exposing boda boda riders to financial insecurity.

“There is one condition that makes predatory lending possible: poor access to affordable credit,” FDC Vice Chairperson Robert Centinary Franco said in a media briefing on Monday. “Ugandans turn to moneylenders because they are accessible while formal credit does not reach them,” he added. FDC said more than half of adult Ugandans have borrowed money in the past five years, with many relying on moneylenders, mobile lending applications and asset-financing companies instead of banks.

The party said the registered money-lending sector alone handles more than Shs1 trillion annually through about 1,800 licensed lenders, while mobile lending apps and informal lenders have expanded access to credit outside the conventional banking system. FDC said some borrowers end up surrendering land, homes and livestock after failing to repay loans. 

In some cases, borrowers are allegedly persuaded to surrender national identity cards and sign documents presented as loan agreements but structured as property sale agreements. “When they default, there is therefore no conventional loan to dispute,” the party said. FDC also described the boda boda sector as a major destination for unemployed and underemployed young people who have limited alternatives in the formal job market.

“The boda boda economy has become one of the main destinations for Uganda’s unemployed and underemployed youth, absorbing large numbers of people whom the formal job market has no room for, without adequate safety nets, insurance, or dignity,” Franco said. The party said most riders do not own their motorcycles outright when they enter the sector. Instead, they acquire them through hire-purchase arrangements requiring daily or weekly payments.

FDC said a rider who falls behind on payments can have the motorcycle repossessed even after paying substantial amounts, leaving them without their main source of income. “When the bike is taken, the rider’s income stops the same day,” the party said, warning that some affected riders may turn to crime after losing their livelihood. To address the problem, FDC proposed cheap capital with minimal collateral requirements for vulnerable groups, farmer banks in agricultural zones, and the restoration of the Cooperative Bank. 



FDC further called for enforcement of existing laws against illegal and unregistered money lenders and digital loan applications that use “threats, blackmail, and harassment” to recover debts. FDC also criticised the government’s mobile money tax policy, arguing that ordinary Ugandans are being taxed repeatedly as the same money moves through the economy.