Ismail Musa Laddu
19 June 2008
Kampala — The performance of the financial sector in Uganda should not worry the public because it is not only competitive but also thriving at an impressive rate, the Bank of Uganda Governor said last week.
"I wish to assure the public that Uganda's financial sector is sound, stable and resilient," Mr Emmanuel Mutebile said during the official launch of Kenya Commercial Bank in Uganda.
Mr Mutebile's argument is based on the banking sector non-performance loans which have fallen from 9.8 per cent to 3.9 per cent in eight years, something that he said, "has sent many banks knocking to be allowed to operate in Uganda."
Another impressive indication according to Mr Mutebile, is the public confidence in the sector that he said has culminated into the growth of deposit base of banks from over Shs3 billion to more than Shs4 billion between last year and now, a percentage growth of 26.4 per cent.
Also within the same period, Mr Mutebile said, the total assets of the financial institution in Uganda grew by 41.5 per cent from over Shs4 billion to over Shs6 billion.
However, despite Mr Mutebile's impressive figures in the banking sector growths, Uganda still stands alone in the East African region with the staggering interest rate ranging between 21 and 25 per cent compared to Kenya which is between 12 and 16 per cent and Rwanda at 16 and 18 per cent respectively.
In response Mr Mutebile said the solution to the astounding interests' rates and scaring collateral lies in allowing more players into the financial sector and installing of Credit Reference Bureau (CRB).
"I love competition, because this is the only way high interest rates can be reduced," Mr Mutebile said, adding that to improve risk management and enforce the repayment culture, they have licensed the operation of CRB which will improve credit culture.
Between last year to-date, BoU has licensed five commercial banks, which include Housing Finance, United Bank for Africa, KCB Bank, Continental Trust Bank and FINA Bank, all these as a measure to counter interest rate and take financial services to the people.
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