Bank of Uganda shuts down EFC Uganda over undercapitalization

The Bank of Uganda (BoU) has placed EFC Uganda Limited, a microfinance deposit-taking institution, under liquidation, revoked its license, and ordered it to wind up its activities

The central bank in a statement cited EFC Uganda Limited’s significant undercapitalization and poor corporate governance as detrimental to depositors’ interests.

“In exercise of its powers under Sections 72 (1) and 12 (1) (d) & (g) of the Microfinance Deposit-taking Institutions (MDI) Act, 2003 as amended, Bank of Uganda (BoU) has effective today, 19th January 2024, placed EFC Uganda Limited under liquidation, revoked its license, and ordered for the winding up of its affairs,” Central Bank Deputy Governor Michael Atingi-Ego wrote in a statement on Friday, January 19, 2024.

Liquidating EFC Uganda has been the only feasible choice given the institution’s weak financial position, the central bank said.

“This action has been taken because the Bank of Uganda has determined that the continuation of EFC Uganda Limited’s activities is detrimental to the interests of its depositors due to the institution’s failure to resolve its significant undercapitalization and poor corporate governance,” he said.

The deputy governor said that the Bank of Uganda and the Deposit Protection Fund of Uganda will inform depositors of the arrangements that will be put in place to enable them to access all of their deposits.

“All other creditors are requested to submit their claims to the Office of the Director of Financial Stability, Bank of Uganda within 30 days from the date of this statement. All borrowers of EFC Uganda Limited must continue to service their loan obligations by making payments at Bank of Uganda offices and branches,” the BoU boss said, asking any person possessing the property of EFC Uganda Limited to deliver it to Bank of Uganda and hand it over to the Office of the Director, Financial Stability.

“In accordance with Section 69 of the Act no steps may be taken by any person to enforce any security over the property of EFC Uganda Limited (MDI) and no other proceedings or execution of legal process may be commenced or continued against the institution or its property. All inquiries should be addressed to Bank of Uganda,” he added.

Late last year, EFC Uganda closed up to five of its key business service centers within the Greater Kampala Metropolitan Area (GKMA) including Kireka, Mukono, and Nateete will close on November 21 while Kalerwe and Nansana.

“Starting from October 24th, 2023, EFC Uganda will embark on the process of closing down five of its business service centers to help streamline business processes while leveraging on partnerships in the banking sector,” the EFC said, describing the development as a strategic decision.

“It should be noted that EFC’s services to its esteemed clients will seamlessly continue through its cash handling branches at both Kamwokya Branch, on EFC House, Plot 45 Kira Road, Kamwokya and Ndeeba Branch, on Master Wood Plaza, Masaka Road, Ndeeba.”

EFC Uganda Limited was among the microfinance institutions in Uganda licensed and supervised by the Bank of Uganda.