The 2.8% a month interest cap, explained
Goodname Finance
What the legal ceiling on money lender interest means in shillings, and how to check a quote against it.
Money lenders in Uganda may not charge more than 2.8% interest a month, under Legal Notice No. 21 of 2024. Goodname Finance does not price a loan above that ceiling.
What it means in shillings
On a loan of UGX 1,000,000, 2.8% a month is at most UGX 28,000 of interest for each month the full amount is outstanding.
Flat and reducing rates
A flat rate is charged on the original amount for the whole loan. A reducing rate is charged on what you still owe, so the interest falls as you repay. To compare a flat charge with the cap, spread it over the months: a 10% flat charge over four months is 2.5% a month, which is within the cap. Over two months it would be 5% a month, which is not. That is why our salary loan starts at four months.
Checking your quote
Take the total interest on your quote, divide it by the loan amount and by the number of months. The answer should be 2.8% or lower. Add up any fees separately, because they are a cost too, and ask what each one is for.
If a quote looks higher
Ask the lender to explain it. If you are not satisfied, you can complain to the lender and then to UMRA.