COMMON QUESTIONS ANSWERED
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What is The Microfinance Support Centre Ltd?
The Microfinance Support Centre (MSC) Ltd is a company fully owned by the Government of Uganda. It was incorporated in 2001 as a company limited by guarantee, and is under the Ministry of Finance, Planning and Economic Development
What does The Microfinance Support Centre do?
MSC is mandated to provide affordable credit and business development services to Ugandans.
Who are MSC’s target clients:
MSC’s target clients include:
- Savings and Credit Cooperative Societies
- Microfinance Institutions
- Cooperative Unions
- Area Cooperative Enterprises
- Small and Medium Enterprises
- Sole Proprietors
Where is The Microfinance Support Centre located?
The Headquarters of MSC is in Kampala on 46 Windsor Crescent, Kololo. Additionally, MSC has offices countrywide in Arua, Lira, Hoima, Jinja, Kabale, Kabarole, Kampala, Masaka, Mbale, Soroti and Mbarara and Moroto; and also works through 161 Reference SACCOs that work as service points in 100 out of 119 districts.
Does The Microfinance Support Centre give credit to individuals?
Currently MSC works through institutions such as Savings and Credit Cooperative Societies (SACCOs), Cooperative Unions (CUs), Area Cooperative Enterprises (ACEs), Microfinance Institutions (MFI’s), Groups and Small & Medium Enterprises (SMEs). Individuals can access credit through institutions financed by MSC.
What activities does The Microfinance Support Centre finance?
MSC finances the following: agricultural production, marketing and value addition; trade and commercial activities; acquisition of value addition machinery; environmental conservation; and to a lesser extent essential services activities – education, health, tourism and solar energy.
What is the loan period that The Microfinance Support Centre gives to its clients?
MSC’s loan period ranges between 2-4 years, depending on the activity financed. Payment for the loan may be made monthly or quarterly.
How does one qualify for a loan from The Microfinance Support Centre?
For an institution to qualify to access a loan from MSC, it should fulfill the following conditions:
- Should be registered
- Should have clear ownership and governance structure,
- Should have clearly accessible physical office(s) within the area of operation with clear target community,
- Should preferably have at least 2 staff with experience of at least 2 years in the business. Qualification of the 2 staff should be at least a diploma in Accountancy, Business Administration, or any other related discipline
How does a Group in the village benefit with such conditions?
MSC understands the capacity of every category of its clients. In the case of Groups, the requirements are not as detailed as with other categories. The criteria for a Group are as follows:
- Should be registered
- Have a clearly defined meeting place
- Have a clear leadership structure
- Clear evidence of working together for at least one year prior to application
- Basic records
- A current bank account
- Personal guarantees of at least three (3) members
What happens if an interested institution does not meet the above criteria?
MSC will offer training to potential clients that do not meet the above criteria to prepare them for financing.
What interest rates are charged by The Microfinance Support Centre?
MSC charges between 9% – 17% per annum, depending on the activities to be financed. SACCO’s enjoy the lowest rates.
What are the minimum and maximum amounts of credit that The Microfinance Support Centre can give?
The minimum amount of credit that MSC can give is UGX. 5,000,000/= while the maximum is UGX. 3bn. The highest amount usually goes to Cooperative Unions with big membership of primary societies.
How long does it take to process a loan?
MSC’s average loan processing time is as follows:
- For loans up to UGX.10m = not more than 12 working days
- Between UGX.10m – 50m = not more than 16 working days
- Between UGX.50m – 400m = not more than 20 working days
- Above UGX.400m = not more than 34 working days
What documents does an interested borrower need to submit?
- Certified copy of Certificate of Registration or Incorporation.
- Certified copy of the Constitution e.g. Memorandum and Articles of Association, Bye laws or Trust Deeds etc.
- Certified copies of the Annual Returns filed with the Registrar of Companies or Department of Co-operatives, where applicable
- Audited Accounts for at least 1 year (including the management letter and cash flow statement) by a registered Audit Firm or the Department, where applicable
- Latest financial statements with cash flow statement [un-audited] from the last audit to the period prior to loan application including Latest Performance Report and Portfolio Report or PMT report and a Rating report (if available.)
- Credit/Lending Manual (guidelines) for all SACCOs and MFIs except regulated financial institutions and SMEs.
- Either Business Plan/Strategic Plan / Annual Estimates with financial forecasts thereof on any of these.
- Copy of the mandate/ resolution to borrow [should be registered for Companies] and Copy of the maximum liability [for Co-operative Societies].
- Copy of a valid operating license i.e. Money Lenders License [for Companies] / Banking license / MDI license or trading licence (for SMEs) (whichever is applicable).
- Current bank account and bank statement for at least 6 months.
What is Islamic Microfinance?
Islamic Microfinance is a type of financial service that is guided by the principles of Islamic (Shari’ah) law. Islamic law emphasizes moral and ethical values in all dealings, prohibiting the payment or receipt of interest (riba). It also prohibits investment in businesses dealing in piggery, alcohol, prostitution and gambling, among others. Uncertainty (Gharar) and market speculation (Maysir) are not practiced either under Islamic Microfinance.
Why did The Microfinance Support Centre introduce Islamic Microfinance and yet Uganda is not an Islamic country?
MSC introduced Islamic Microfinance in a bid to meet the high demand for finance and to expand the range of products for financial inclusion of all Ugandans.
How does Islamic Microfinance work?
Islamic Microfinance has the same purpose as conventional microfinance except that it operates on a profit and loss sharing principle as opposed to charging interest. For instance, when a financial institution (MSC in this case) invests in a client’s project, the proceeds from the project will be shared on an agreed ratio.
Is Islamic Finance only for Muslims?
No. Islamic Microfinance is open to all as long as the enterprise follows the Islamic financing principles.
What modes of Islamic Microfinance does MSC offer?
- Musharaka (Equity financing/partnership)
- Murabaha (Cost plus financing)
- Mudaraba (profit sharing)
- Salam (forward sale)
- Muqawala (one party undertakes to manufacture an item or perform work for compensation).
- Istisna (is a long-term contract to be delivered at a future date for an agreed fixed price).