MONEY LENDERS AND THE BODA BODA DEBT TRAP: TWO SIGNS GOVERNMENT FAILURE

There is a very big problem in Uganda that no one is talking about, and we want to address it today.

Over half of adult Ugandans have borrowed money in the past five years. Most of them did not borrow from a bank. They borrowed from a money lender, a mobile lending app, or financed a motorcycle through an asset-financing company because the formal financial system was never built to reach them.

The registered money-lending sector alone turns over more than a trillion shillings a year through roughly 1,800 licensed lenders.

Then there is the problem of money-lending mobile apps and codes, some of which are provided by telecommunications companies.

In almost every village in Uganda, there are money lenders who have opened offices in trading centres. Many borrowers end up losing land, homes, and livestock when they cannot repay their loans. Some borrowers are persuaded to hand over national identity cards and sign what are presented as loan agreements but are actually structured as sale agreements for their property. When they default, there is therefore no conventional loan to dispute.

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.

Almost none of these riders own their motorcycles outright when they start. They acquire them through asset-financing companies and micro-credit firms on hire-purchase terms: a deposit, followed by weekly or daily installments, until they fail to pay and have the motorcycle repossessed over a final shortfall of a few hundred thousand shillings, wiping out nearly everything they had already paid.

When the bike is taken, the rider’s income stops the same day. Some, unable to reacquire a motorcycle, turn to crime.

There is one condition that makes predatory lending possible: poor access to affordable credit.

Ugandans turn to money lenders because they are accessible while formal credit does not reach them. Every one of the commitments above is aimed at closing that gap, not managing its symptoms.

We therefore propose the following:

1. Cheap capital with minimal collateral requirements, under the pillar addressing women, youth, people with disabilities, the elderly, pensioners, and veterans.
2. Farmer banks within agricultural zones, to ease access to credit for land, seed, pesticides, and irrigation without the terms imposed by money lenders.
3. Restoration of the Cooperative Bank and recovery of stolen cooperative assets, to rebuild a formal credit channel that predatory lenders have replaced.
4. Formation of leadership SACCOs at parish, sub-county, and district levels, backed by direct capitalisation, as a savings and credit structure closer to where people actually live.
5. Establishment of a Boda Boda Savings and Protection Cooperative Scheme, so riders have access to medical, pension, and accident cover, and asset-financing companies are no longer the only path into the sector.
6. Enforcement of existing laws against illegal and unregistered money lenders and digital loan apps, including those that use threats, blackmail, and harassment to recover debts.
7. Protection of national identity cards and land titles from being used as informal, unregulated collateral outside any registered lending process.

 

MOBILE MONEY TAXES THAT WERE RECENTLY INTRODUCED

Government is taxing the same shilling repeatedly as it moves through a worker’s hands, and it is doing so on the backs of people who have no way to negotiate, no accountant to shield them, and no lobbyist in Parliament.

Take the example of one salary earner. Follow their money from the moment it is earned to the moment it is spent.

PAYE is deducted before the salary reaches the worker. This is tax one.

The worker sends part of that salary to the village or to a friend through mobile money. Excise duty of 0.5 percent applies to the withdrawal, and excise duty of 15 percent applies to the service fee charged on the transaction. These are tax two and tax three, charged on money that has already been taxed once.

The worker walks into a shop and buys groceries. VAT applies to that purchase. This is tax four, on money that has now been taxed three times.

If the worker manages to save anything, tax reaches into that too. This is tax five.

If you pay close attention, many mobile money kiosks are closing, and the cost of doing business is increasing as a result.

Government’s own Ministry of Finance considered cutting the excise duty from 0.5 percent to 0.25 percent in its 2026/27 revenue proposals. It shelved that plan before the final budget. It chose to keep the burden exactly where it is.

Small businesses and ordinary Ugandans depend heavily on mobile money transactions to do business and meet their daily needs. These are the transactions the government has chosen to tax most heavily.

Over 150,000 mobile money agents, most of them women and young people, are losing income as transaction volumes fall and Ugandans revert to cash to avoid the tax.

Daily micro-loans to farmers, monthly transfers to refugees, and the collection of electricity and water payments all run through mobile money. The government’s tax policy is undermining the same financial inclusion agenda it claims to champion.

This government has built a tax system that punishes the ordinary Ugandan for the basic act of using their own money, while allowing corruption and waste to go untaxed and unaccounted for at the top.

 

FDC calls on Government to:

1. Reduce the excise duty on mobile money withdrawals and reverse the 2026 decision to keep it unchanged.
2. End the stacking of excise duty on both the withdrawal value and the service fee on the same transaction.
3. Government should instead focus on Taxing telecom Companies’ Profits and reduce the burden on ordinary citizens

 

FOR GOD AND MY COUNTRY

 

 

Robert Centinary Franco

VICE CHAIRPERSON