The Public Accounts Committee (PAC) has summoned the Board members of the Microfinance Support Centre to address concerns over the entity’s lack of a risk management framework for Expected Credit Losses (ECL).
Despite operating for over 20 years and managing significant funds, the Centre has failed to implement this critical framework.
The summons follows findings in the December 2023 Auditor General’s report, which highlighted the absence of documented Risk Management Strategies at the Microfinance Support Centre. The report has raised serious questions among MPs about the Board’s awareness and execution of their roles.
PAC Chairperson Muwanga Kivumbi expressed incredulity that the institution has operated without the essential framework for two decades.
“The big question is that this Board and all the Boards that have been there before, comfortably presided over an institution supervised by the Ministry of Finance without the basic framework that would guide this institution, surely for 20 years. A draft can’t be in place,” noted Kivumbi.
The Auditor General defines the ECL framework as a set of policies, procedures, and controls necessary for effective credit risk management and accurate computation of expected credit losses. This framework is crucial for estimating credit losses over the life of financial instruments based on credit risk and future economic conditions.
Gorreth Namugga (Mawogola South) questioned how the Microfinance Support Centre has managed to handle the Emyooga funds, amounting to over Shs72Bn, without an ECL policy.
“We are dealing with an institution that is giving money to the very vulnerable. I wonder how this entity has been operating for all this long… How could this entity operate without the ECL policy? For me, the Microfinance Support Centre is a risk to this country,” remarked Namugga.
In defense, Simon Peter Rukorera, Finance Manager at the Centre, assured MPs that an ECL policy draft is in place and is expected to be approved by the end of June 2024.
“As I speak, we have drafted the ECL policy and we are very sure that before the close of the financial year, this policy would be approved by the board and come by close of this financial year, it will be fully operational,” Rukorera stated.
However, Xavier Kyooma (Ibanda North) rejected Rukorera’s explanation, questioning the Board’s understanding of their responsibilities.
“Is the Board aware of what they are supposed to do… Do you have a risk strategy in place? The absence of this framework means that every staff, board member does as they please… We must have these internal operational manuals such that they help you,” Kyooma emphasized.
Consequently, PAC Chairperson Muwanga ruled that the Board, led by Emmanuel Aliba, must appear before the Committee. Other board members summoned include Fredrick Tabura, Milton Odong, Agnes Kadama, and Diana Nandagire.
“It is a policy matter which I think the Committee is of the need to interact with the Board but above the Board, there is a Ministry and above the Ministry, there is Parliament,” noted Muwanga.
The forthcoming meeting with the Board aims to ensure the institution’s compliance with necessary financial governance standards.
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