Equity Bank in Uganda is under scrutiny after reports of alleged fraudulent practices involving mobile money floating and non-secured loans have surfaced. It has come to light that many individuals in Uganda engage in mobile money fronting.
Equity bank found when most of these companies and individuals had already registered in Airtel and other companies, so Equity bank came in as a broker to give these companies and indviduals the float they needed to run their businesses.
Over 200 individuals from various parts of the country signed up for non-secured loans, using their businesses as collateral. When the loan program first started, borrowers were required to repay 500,000 Ugandan shillings for every 100 million borrowed as interest. However, as Equity Bank saw success with the program, they decided to reduce the interest rate to 350,000 shillings for every 100 million borrowed on a weekly basis.
The situation took a concerning turn when Equity Bank quietly increased the interest rates without informing their clients or seeking their consent. This move was justified by pointing to the deed agreement which stated that interest rates could be increased at any point. However, according to the law, clients should have been notified at least three months in advance of any interest rate changes.
Furthermore, there have been allegations that Equity Bank has been involved in shady practices, including misappropriating clients’ funds, particularly those who have taken out loans. The issue of businesses owned by unregulated foreigners is also a cause for concern as it poses a threat to the nation’s economic stability.
Calls have been made to authorities such as ATGP Christopher Ddamulira, the Director of Crime Intelligence, Minister of Internal Affairs Kahinda Otafiire, and Major General Jim Muhwezi, among others, to investigate these fraudulent activities in banks across the country. It is imperative to address these issues before they escalate to a point where citizens resort to storing their money in unconventional ways due to lack of trust in financial institutions.
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