Who Benefits From Regulation?

This study examines the effect of the Micro Deposit taking Institutions (MDI) Act on the various microfinance stakeholders. The study uses a combination of document reviews, interviews, discussions and performance analysis. Study findings indicate that since the enactment of the MDI Act:

• Micro deposit taking institutions (MDIs) have become more business-oriented and innovative;
• MDIs have seen a reduction in borrowers and a significant increase in loan portfolios;
• Number of savers has increased sharply, while the total value of savings has risen only modestly;
• Loan pricing has not decreased, there has been a slight rise in the portfolio yield of MDIs;
• Financial and operational performance of MDIs experienced a temporary setback just after licensing;
• MDIs have realized that their status is unfavorable in relation to banks, and mature MFIs are less eager to become MDIs;
• Expectations of the Bank of Uganda (BoU) and MDIs have been met, while the Governments expectations have not.

The study states that the MDI Act and application of regulations have generated positive and negative results. It presents preliminary lessons and recommendations to address unmet expectations.