A scathing June 2025 audit report into the Microfinance Support Centre Limited (MSCL) has unveiled a catalogue of management failures, uncollected funds, and strategic missteps that seriously compromise its mission to promote financial inclusion among Uganda’s underserved communities.
Although MSCL managed to collect UGX 38.7 billion out of its budgeted UGX 39.5 billion in the financial year—an impressive 98% collection rate—closer analysis reveals concerning underperformance in critical revenue streams.
Recoveries from written-off loans amounted to only UGX 268 million, versus a target of UGX 1.75 billion—just 15% of expectations. Meanwhile, profits from Islamic investment vehicles hit only half of the projected levels, and government funding underperformed by UGX 10.8 billion, with no adjustments to plans as permitted under the Public Finance Management Act.
A particularly troubling revelation involves UGX 17.8 billion in rescheduled loans where repayments have yet to begin. The Auditor General described these as a “graveyard of failed recoveries,” questioning the rigour of due diligence and client appraisal processes before loan restructuring.
The report also highlighted serious procurement issues. Despite budget allocations of UGX 5.99 billion for procurement—including land, vehicles, and ICT systems—none of these planned projects materialized. The Auditor General labelled this as theoretical budgeting disconnected from effective execution, resulting in stagnated service delivery and a failure to translate budgets into tangible support for partner SACCOs.
The audit has resonated with parliamentary scrutiny. A related Auditor General report from December 2023 and Public Accounts Committee (PAC) hearings have already exposed MSCL’s gap in implementing an Expected Credit Loss (ECL) risk management framework.
MPs, including PAC Chairperson Muwanga Kivumbi, expressed astonishment that such a critical risk framework had been absent for over two decades—despite MSCL managing vital funds such as the government-sponsored Emyooga scheme Draft ECL policies remain unapproved well past prior deadlines, exposing MSCL to potential instability and reputational risk.
In light of criticism, MSCL management has pledged to tighten internal systems. They promised to revamp policy frameworks, strengthen client vetting and collateral management, and align procurement to budgets. However, the Auditor General’s warning suggests substantive structural reforms are overdue if MSCL is to fulfill its mandate.
MSCL occupies a crucial position within Uganda’s financial inclusion ecosystem—supporting rural SACCOs, SMEs, and underbanked communities. Its missteps risk undermining confidence in wholesale microfinance, potentially disrupting credit flows to the most vulnerable.
With considerable on-budget resources at stake, the institution’s ability to model robust risk management and client loan recovery is fundamental—not just to its success, but to Uganda’s broader socioeconomic goals.
What’s Next?
The coming months will be pivotal:
- Auditor General Follow‑Up: Will MSCL demonstrate notable improvement in its credit recovery and procurement governance?
- PAC Oversight: How rigorously will Parliament enforce adoption of the ECL framework and accountability for missed loan repayments?
- Strategic Recalibration: Can MSCL turn around its performance and reassure stakeholders of its role as a dependable wholesale lender?
In an environment where access to finance is essential for rural and agricultural upliftment, the stakes could not be higher. MSCL’s response to these audit findings will serve as a test not just of institutional resilience but of Uganda’s commitment to inclusive growth.