Government through the National Identification and Registration Authority (NIRA) will soon rollout the Universal Digital ID system for Ugandans as one of the measures to combat the practice of Money Lenders confiscating people’s National Identity cards as security for loans.
The new initiative was revealed by Internal Affairs Minister Gen. Kahinda Otafiire in his response to Hon. Osuru Moureen, the Woman Member of Parliament for Arua City on Thursday August 1 2024, on the question about Government’s plans to end the vice of confiscating people’s national identity cards as security for loans by money lenders.
In the statement presented to Parliament on Wednesday 23 October 2024, Otafiire noted that the practice of confiscating National Identity cards as collateral for loans by Money Lenders has become rampant yet it violates the rights and dignity of the citizens. He noted that the practice does not only infringe on the rights of citizens but also poses a serious threat to national security and social stability.
In a bid to fight the vice, Otafiire said Government her enacted the Tier 4 Microfinance Institutions and Money Lenders (Money Lenders) Regulations, Statutory Instrument No. 08 of 2018, which expressly prohibits the demand or acceptance of a national identity card, passport, warrant card, or other document establishing the identity
or nationality of the holder, as collateral for any money advanced to a borrower as a loan. (Regulation 18).
Therefore, any money lender found in violation of these laws and regulations, is in breach of the law and if convicted is liable to suffer severe penalties, including the revocation or non-renewal of their operating licenses, payment of
fines, and imprisonment.
Additionally Otafiire noted that NIRA is in the process of upgrading the national ID by rolling out Digital (Electronic) Identity Cards (E-IDs). He said, one of the advantages of the introduction of E-IDs is that it will combat the troubling practice of confiscating National Identity Cards as collateral for loans by money lenders.
According to the minister, the introduction of E-IDs will reduce dependency on physical cards for identification purposes. With digital verification, citizens will be able to authenticate their identity using
electronic means, such as mobile apps or online platforms. This planned shift reduces the risk of physical IDs being
used as collateral since digital identity verification does not require the physical handover of the card.
“Money lenders will no longer be able to hold a physical national ID as security because the verification process will remain under the control of the cardholder and the authorized institutions” Otafiire said adding that the initiative is not only about adopting new technology, but also will protect our citizens from the
predatory practices that have plagued our society for too long.
Otafiire affirmed that when a National Identity Card is confiscated, it severely limits an individual’s ability to participate in various livelihood activities.
“The confiscation of National Identity Cards by money lenders, opens the door to exploitation and abuse. Individuals who find themselves unable to repay their loans are often subjected to
harassment, intimidation, and further financial extortion. This cycle of exploitation exacerbates poverty and undermines efforts to foster social and economic development in our communities.” The minister noted.
Quoting Section 69 (3) of the Registration of Persons Act, Otafiire said an issued national identification
card remains the property of the Government and therefore a Money Lender has no authority to deprive or dispossess a person of his or her national ID. He added that staking the national ID card is illegal but also the national ID is Government property and therefore cannot be staked as security or collateral.
“Government did not intend national identity cards to be used as collateral for borrowing but rather as identification documents to foster social and economic development in the country being enablers to access
services easily by the citizenry.” Maj. Gen. Otafiire stated.
In Uganda, the National Identity Card is a critical document that serves as proof of identity, nationality, and citizenship. It is essential for
accessing a wide range of services. However, there has been a disturbing increase in the number of reports where money lenders are taking these vital documents as collateral for loans.
This illegal practice, leaves borrowers vulnerable and deprives them of their most basic identification document, thereby leading to further financial and social marginalization.
“Without their ID, citizens cannot open bank accounts, receive government services, or even verify their identity in various circumstances when the situation warrants. This practice
disproportionately affects the most vulnerable members of society, including the poor, elderly, and uneducated, who may not fully understand their rights or the legal implications of surrendering their IDs in this manner” said Maj. Gen. Otafiire.
On the implementation challenges due to lack of Internet, he said Government is cognizant of the fact that the majority of its citizens do not yet have access to internet and smart phones, to enable the immediate implementation of a universal Digital ID system. However, when this happens, it will be the ideal solution to decisively deal with this
challenge.
Additional measures, according to Otafiire, include; Government to undertake nationwide public awareness campaigns to educate citizens about their rights and the dangers of
surrendering their National Identity Cards as collateral, continuous engagement with key stakeholders to ensure a collaborative approach to
ending this practice, and for state organs to step up enforcement of the law by arresting and prosecuting persons involved in this illegal
practice.
