Anyone seeking to offer foreign exchange services in Uganda will be required to have a capital of at least Shs200 million or face closure within six
Anyone seeking to offer foreign exchange services in Uganda will be required to have a capital of at least Shs200 million or face closure within six months should a draft law pass in its current form.
The current minimum capital requirement for forex bureaus is Shs50 million. A proposal in the Foreign Exchange (Amendment) Act, 2023 wants the figure to be increased fourfold.
“The Shs200 million is for those who are going to provide forex services and also remittance of money,” Mr Moses Kaggwa, the acting director of economic affairs at the Finance ministry, told Sunday Monitor.
He added: “If you have an office or premises where you are going to operate a forex bureau and you are remitting money, you must have a minimum of four professional staff who maybe earning about Shs1 million every month, must have computers, a security room, security outside, and the cost of those items alone is more than Shs50 million.”
Mr Henry Musasizi, the junior Finance minister, told the House’s Finance committee last week that the current legal provisions in the legislation on the amendment table leave a lot to be desired.
“Since the enactment of the Foreign Exchange Act in 2004, there have been significant developments in the area of Information and Communication Technology, EAC regional harmonisation efforts, increased risk exposures emanating from new business trends, and increased regulatory requirements such as know-your-customer,” he said, adding: “Compliance to Anti-Money Laundering and Countering the Financing of Terrorism measures necessitated the review of the Act to provide for the improvements in the regulation and efficiency in Foreign exchange and money transfer business.”
Tucked in the draft law presented on Tuesday is the government’s proposal to grant the central bank the authority to become shareholders of under-capitalised institutions. The ultimate objective is to enhance the minimum capital requirements within a span of six months. Failure to meet these requirements would entail the risk of closure for such institutions.
Additionally, the government wants Parliament to empower the Finance ministry and Bank of Uganda to revise or alter the capital amount for any institution or individual seeking to establish a forex bureau at any point without parliamentary approval. A section of legislators on the Finance committee raised objections to this.
“This indicates what has been an outcry in the committee that there is lack of research because you want us to legislate, and also want us to give the [central bank] governor unfettered powers to revise what has been legislated upon. Is your request based on research?” Mr Xavier Kyooma (Ibanda North) wondered.
He added: “If you give us powers to legislate, why do you want to give unfettered powers to the governor and the [Finance] minister because at any one time, either some circumstances have come and some players need to be favoured, the minister may simply revise the amounts being legislated upon.”
The government’s move comes in the wake of a spate of attacks on mobile money outlets and financial institutions in the country.
When asked why the government had not prioritised addressing such physical threats, Mr Kaggwa reasoned that other legal provisions cater to that.
“You cannot have premises that are guarded by one security personnel,” Mr Kaggwa said, adding that the protection “must be there 24 hours.”
In the draft
Tucked in the draft law presented on Tuesday is the government’s proposal to grant the central bank the authority to become shareholders of under-capitalised institutions.
The ultimate objective is to enhance the minimum capital requirements within a span of six months. Failure to meet these requirements would entail the risk of closure for such institutions.
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