Gov’t Bans Use of National IDs as Loan Collateral by Money Lenders

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The government has directed money lenders and their customers to stop using identification documents, particularly national IDs, as collateral for loans, as this practice is considered unlawful.

Chris Baryomunsi, the Minister for ICT and National Guidance, acknowledged this while addressing journalists at the Uganda Media center on June 28, 2024, stating that the government’s decision is based on numerous public complaints.

According to Baryomunsi, it is against the law for money lenders to demand these documents, and individuals are also breaking the law by offering them as collateral.

“For the money lender, the law does not allow you to ask for those documents and even the holder of that document is also prohibited by law from surrendering those documents as a form of collateral,” Baryomunsi stated.

He emphasized that holding someone else’s ID card is unlawful, and moneylenders must promptly return any IDs in their possession.

While the government is conducting research and consultations to establish effective safeguards, Baryomunsi highlights the need for caution regarding online scammers who aim to cheat people out of their money.

He emphasizes that the government will collaborate with the Bank of Uganda and other relevant institutions to provide guidance on the matter of online lending services, reflecting their commitment to protecting Ugandans from fraudulent activities.

On September 18, 2023, Lawmakers backed the National Identification of Registration Authority (NIRA), as it warns money lenders against detaining National Identity Cards as collateral, saying this practice is being done in violation of the rights to access services from the Government by the cardholders.

NIRA’s directive followed a revelation by the Uganda Police that two suspects had been arrested after breaking into T.M.K Loans Services in Wakiso district and stealing 104 national IDs that people had deposited as collateral to obtain loans.

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