Section 2: Interpretation

(1) In this Act, unless the context otherwise requires- "affiliate" in respect of any institution, means any entity, corporate or incorporate, where five percent or more of any class of its voting shares or other voting participation is directly or indirectly owned or controlled by the institution, or is held by it with power to vote; "agent" means an entity contracted by an institution and approved by the Bank of Uganda to provide microfinance deposit taking services on behalf of that institution; "associate " in relation to- (a) a natural person, means- (i) a close relative of that person; (ii) any person who has entered into an agreement or arrangement with that person, relating to the acquisition, holding or disposal of, or the exercising of voting rights in respect of shares in the controlling company in question; (iii) any company of which that person is a director; or (iv) any person who is an employee or partner of that person; (b) a person not being a natural person- (i) being a company, means any subsidiary or holding company of that company, any other subsidiary of that holding company and any other company of which that holding company is a subsidiary; (ii) not being a company to which subparagraph (i) applies, means another non-natural person which would have been a subsidiary of the first-mentioned non-natural person - (A) had such first-mentioned non-natural person been a company; or (B) where that other non-natural person is not a company, had the first-mentioned non-natural person and that other non-natural person each been a company; or (iii) means any person in accordance with whose directions or instructions the board of directors of or where such non-natural person is not a company, the governing body of that non-natural person is accustomed to act; and (c) any person whether natural or non-natural- (i) means any non-natural person of which the board of directors or where the non- natural person is not a company, of which the governing body is accustomed to act in accordance with the directions or instructions of the person first-mentioned in this paragraph; and (ii) includes any trust controlled or administered by that person; "bank" means any company licensed under the Financial Institutions Act to carry on banking business as its principal business and includes all branches and offices of that company in Uganda; "banking business" has the meaning assigned to the term "financial institution business" in the Financial Institutions Act; "branch" means a place of business which forms a dependent part of a microfinance institution and which conducts all or some of the operations inherent in the business of that microfinance institution; "cease and desist order" means an order issued by the Bank of Uganda to an institution to refrain from doing anything that is unsafe or that may prejudice depositors' interests; "Credit Reference Bureau" means the Credit Reference Bureau referred to in section 50; "close relative" in relation to any person, means- (a) his or her spouse; (b) his or her child, stepchild, parent, ward of parent or stepparent; (c) the spouse of any person mentioned in paragraph (b); "collateral substitutes" means collateral not ordinarily used as security in conventional banking; "company" means a company limited by shares and having a share capital; "compulsory savings" means monies that shall be contributed by a borrower as a condition for receiving a loan or other credit; "control" means the relationship between the parent undertaking and a subsidiary undertaking or similar relations between an individual and an undertaking or the power to determine the financial and operational policy of an institution under its charter or an agreement, or direct or indirect influence by a person over decision-making and the management of an institution; "core capital" means shareholders' equity in the form of issued and fully paid-up shares including retained reserves approved by the Bank of Uganda; "corporate governance" has the meaning assigned to it in section 28(2); "credit facilities" means- (a) an institution granting an advance, loan or other facility in which a customer of the institution has access to funds or financial guarantees; including any economically equivalent arrangement in connection with Islamic microfinance business; or (b) an institution incurring a liability on behalf of a customer; "currency point" has the value assigned to it in Schedule 1 to this Act; "deposit" means a sum of money received or paid on terms under which it will be repaid, either on demand or at a time or in circumstances agreed upon by or on behalf of the person making the payment and the person receiving it, with or without interest, premium or other economic return, except that the following shall not qualify as deposits- (a) any sum of money which is paid by way of advance or part payment under a contract for the sale, hire or other provision of property or service, where the sum is repayable only if the property or service is not in fact sold, hired or otherwise provided; (b) a sum of money which is paid by way of security for performing a contract; or (c) a sum of money which is paid as security for a credit facility which has been advanced or granted to any person making the payment, except that such sum or interest on it shall not be on-lent; "executive officer" in relation to any institution, includes any general manager or deputy manager of the institution; "group guarantee" means a guarantee mechanism including any economically equivalent arrangement relating to Islamic microfinance business by which a group of borrowers undertake to be liable jointly or severally for a loan or any other credit facility of any one of them; "home country regulator" means the supervisory authority of the home country where the head office of the parent financial institution is based; "institution" means a microfinance deposit-taking institution; "Islamic contract" means a contract designed to comply with the Shari'ah and which satisfies conditions specified by the Bank of Uganda for purposes of complying with the Shari'ah; "Islamic microfinance business" means- (a) the business of receiving money into profit sharing investment accounts or of managing those accounts; (b) the business of providing finance; whether through the acquisition, disposal or leasing of assets or otherwise; or other services which have a similar economic effect or are otherwise economically equivalent to any other microfinance business; or (c) any other microfinance business which involves or is intended to involve entering into Islamic contracts, or which is otherwise carried out or purported to be carried out in accordance with the the Shari'ah; "Islamic microfinance institution" means a company licensed to carry on microfinance business, whose entire business comprises of Islamic microfinance business and which has declared to the Bank of Uganda that its entire operations are to be conducted in accordance with the the Shari'ah; "Islamic window" means the part of a microfinance institution, other than an Islamic microfinance institution, which conducts Islamic microfinance business; "liquid assets" has the meaning assigned to it in section 17(2); "licence" means a licence granted under section 6; "loan insurance fund" means a fund consisting of contributions of group customers of an institution to act as collateral for a credit facility; "MDI" means microfinance deposit-taking institution; "MDI Deposit Protection Fund" means the Deposit Insurance Fund established under section 84; "manager" means an officer of a microfinance deposit taking institution who directs, controls or influences the decision-making of the institution; "microfinance business" means the business carried on as a principal business of- (a) acceptance of deposits from members of the public by any person or institution, regardless of the business form, whether licensed by Bank of Uganda or not; (b) employing deposits, wholly or partly, by lending or extending credit for the account and at the risk of the person accepting those deposits, including the provision of short-term loans or other credit to small or micro enterprises and low-income households, usually characterised by the use of collateral substitutes, such as group guarantees or compulsory savings; (c) engaging in Islamic microfinance business; or (d) transacting such other activities as may be prescribed by the Bank of Uganda by regulations made under section 93 of this Act; "microfinance deposit-taking institution" means a company licensed to carry on, conduct, engage in or transact in microfinance business in Uganda; "Minister" means the Minister responsible for finance; "non-performing loan" means a loan or other credit facility or asset in respect of which the principal, interest or other payment has been due and unpaid for a period specified in the Regulations, or where the principal or interest payment is overdue and has been capitalised; "person" means any individual, company, partnership, fund, foundation or enterprise wherever located or incorporated; "place of business" means any premises at which an institution transacts microfinance business in Uganda and which is open to the public and includes a branch, an agent, a mobile unit, or such other premises as may, from time to time, be prescribed by the Bank of Uganda; "profit sharing investment account" means an account managed by a microfinance deposit- taking institution- (a) in relation to property of any kind, including currency specified in this Act, held for or within the account; (b) as part of its Islamic microfinance business; and (c) under the terms of an agreement where- (i) the account holder agrees to share any profit with the microfinance deposit-taking institution as a manager of the account in accordance with a pre-determined specified percentage or ratio; and (ii) the account holder agrees that he or she alone will bear any losses in the absence of negligence or breach of contract on the part of the microfinance bank; "registered society" means a cooperative society registered under the Cooperative Societies Act; "related interest" means the business interests of affiliates, associates and their related persons; "reputable financial institution" means a financial institution licensed to conduct banking or other financial institution business under the laws of any other country or territory and which meets the criteria prescribed by the Bank of Uganda; "reputable public company" means a company that is financially strong, whose ownership is widely distributed, is of good public standing and meets such other criteria as may be prescribed by the Bank of Uganda; "resident" means- (a) an individual who is ordinarily resident in Uganda for one year or more; (b) the Government of Uganda and its diplomatic representatives located outside Uganda; (c) a company, firm or other enterprise whose principal place of business or centre of control and management is located in Uganda; (d) a corporation, firm or other enterprise incorporated or formed under the laws of Uganda; or (e) a branch of a company, firm or other enterprise located in Uganda, whose principal place of business is located outside of Uganda, except that "resident" does not include a foreign diplomatic representation or an accredited official of that representation located within Uganda, or office of an organisation established by international treaty located within Uganda, or a branch of a company, firm or other enterprise located in Uganda, whose principal place of business is located outside of Uganda; " Shari'ah advisory board " means a board established in accordance with section 22; "short-term credit facility" means a loan or other credit, for which the period for repayment does not exceed two years; "significant shareholder" means a shareholder holding five percent or more of the allotted shares of an institution; "significantly under-capitalised" has the meaning assigned to it in section 63(8); "small credit" means a loan or other credit which is less than one percent of the core capital prescribed in this Act in the case of individual borrower; and five percent of the core capital prescribed in this Act in the case of a group borrower; and "time deposits" means deposits repayable after a fixed period or after notice and includes savings deposits. (2) A reference to loans or credit, lending, extension or provision of credit, credit accommodation or such similar terms, or to any instrument in that respect, collectively referred to as "credit provision" shall apply- (a) any finance arrangement which satisfies the following conditions- (i) the arrangement provides for a person who is the financier to pay a sum of money to another person who is the customer; (ii) the arrangement identifies assets, or a class of assets, which the customer acquires; (iii) the arrangement specifies a finance term which shall be the period at the end of which the arrangement shall cease to have effect; (iv) the customer undertakes, under the arrangement, to make a payment in respect of the capital to the financier during or at the end of the finance term, whether in instalments or not and to pay to the financier other payments on one or more occasions during or at the end of the finance term; and (v) the arrangement satisfies such other conditions as may be specified by the Bank of Uganda by regulations; (b) any finance arrangement other than the finance arrangement referred to in subsection 2(a) which satisfies the following conditions- (i) the arrangement provides for a customer to make a payment in respect of capital to the financier to purchase, lease, hire or otherwise acquire or use assets which are identified; (ii) the financier agrees to sell, lease, hire or otherwise dispose of or allow the use of assets or classes of assets to a customer or to pay a sum of money to another person; (c) any other provision of finance including through the acquisition, disposal or leasing of assets that is economically equivalent to credit provision. (3) In this Act, unless the context otherwise requires, a reference to guarantees or similar terms or a reference to any instrument in respect of guarantees or similar terms, in the Act referred to collectively as a "guarantee provision", shall be interpreted to apply to any arrangement which satisfies the following conditions- (a) the arrangement is economically equivalent to a guarantee provision; and (b) the arrangement satisfies such conditions as may be specified by the Bank of Uganda by regulations.