Uganda bank loan failures nudge higher.

Naomba nikushirikishe na wewe pia kwamba kuna mambo mengi na mazuri ndapi ya picha iliyopo hapo chini ibofye uone.

MORE SCRUTINY: Mutebile said commercial banks are likely to be more careful about who they lend too.

KAMPALA, Uganda - Commercial banks have been trying to lower borrowing rates, but the ratio of Non-Performing Loans (NPLs) has increased to 6.9%.

According to Bank of Uganda (BOU) figures, the average bank lending rates for shilling denominated loans fell to 20.8% in February 2014, the lowest since mid-2011. 

As a result, growth of credit to the private sector picked up slightly in February 2014, registering a year-on-year growth of 6.8%. This is however way below BOU’s projection of 15% at the beginning of the financial year  (FY)2013/14. 

Figures show shilling denominated loans in February 2014 stood at Ush 29.9 billion (just over $11.6 million) compared to Ush60.2 billion ($23 million) in January 2014. 

Lending was mostly geared towards personal loans, with just a small portion going towards manufacturing. 

Consequently, the Central Bank is warning a faster recovery in credit growth may be impeded as banks focus on improving credit quality.

Addressing the BOU monthly nes conference recently, Prof. Emmanuel Mutebile, the Governor the Central Bank said that the increase in Non-Performing Loans means that the commercial banks will put increased efforts into scrutinizing borrowers so as to limit bad loans.

Dr. Adam Mugume, the Executive Director for Research said because of the increase in NPLs, there was a reduction in corporation tax because many banks get the bulk of their profits from interest earning.

“The biggest profit earners are banks. The reason we had the heaviest shortfall in tax revenues of Ush250 billion (nearly $100 million) in December is because the banks did not return profits. Banks that usually remit dividends around this time of the year have not applied to the BoU,” he said. 

Mugume said due to the economic slowdown, NPLs rose to 6.9% in December 2013 from about 4% in September. This is much higher than the 1.8% to 2% that characterized the sector before 2011.

“Credit to the private sector is not growing at the rate at which we had anticipated as a result of the increase in the NPL.  

“When the NPLs increase, it means that banks have to put in more capital to clear the bad loans. They thus have to reduce on credit extension, because any profit made is set aside for the bad loans and that reduces on profitability,” Mugume said.

Usikose kuangalia Movies mbalimbali kutoka kila kona ya dunia, bofya kwenye picha iliyopo hapo chini kuona izo muvies

Nobody is a total failure if he dares to try to do something worthwhile. Tough times never last, but tough people do. The place broke up with applause. Those thirty - five hundred farmers who had lost hope and had battled depression found that hope.

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Filed Under: KIMATAIFA on Monday, April 14, 2014