The Independent (Kampala)

Uganda: Kacita Still Chasing Own Bank

The traders under their umbrella organization, the Kampala City Traders Association (KACITA) are still looking forward to starting their own bank after commercial banks hiked interest rates to the highs that pushed some traders out of business last year.

Everest Kayondo, the chairman of the association told The Independent in an interview on Jan. 9 that they are finalising with a few "things" before they can officially launch the bank any time.

Most commercial banks raised their base lending rates to over 30% in 2011 and 2012 following a tight monetary policy that was implemented by the central bank [the use of the central bank rate to influence interest rates] that aimed at fighting inflation that recorded a 30.4% mark in October, 2011, the highest since 1993. The central bank raised the CBR to 23% at the end of 2011, a decision that influenced commercial banks to hike interest rates to loans.

"It is going to be a public limited company-where the people will buy and sell shares," he said. "It is better to have your own bank where you can easily access cheap credit for business instead of relying on other banks," he added without revealing the date of the launch.

It is not clear whether the traders will be able to raise the minimum capital of Sh25bn required by the central bank before any new entrant launches business in the banking sector. The central bank set March, 2013 as the deadline for all banks to raise the Sh25bn so they can keep in business. This capital requirement is intended to ensure that banks are in a better position to safeguard depositors' money in bad economic times.

The central bank said earlier that they will give out the license to the traders to start their bank after they have met this requirement among others.

There are currently 25 commercial banks operating in Uganda offering both retail and wholesale services to about 14% of the population that use bank services.

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