Banks to lower interest rates

A cashier serves a customer. Banks have agreed to revise interest rates. PHOTO/FILE 

By MARTIN LUTHER OKETCH

Uganda Bankers Association (UBA) has announced that financial institutions have heeded to Bank of
Uganda (BoU)’s call to lower interest on loans within 30 days.

The high lending interest rates in Uganda have increased the cost of borrowing, reduced disposable income, constrained consumer spending and companies’ access to capital for business expansion.

Currently, the average lending rate is 18.18 per cent while the Central Bank Rate (CBR) is 7 per cent.

In a statement on Saturday, UBA said banks at their monthly meeting of chief executives of financial institutions held on July 10 agreed to revise their interest rates downwards within the next 30 days to “stem effects of the economic stress caused by the Covid-19 pandemic.”

However, UBA did not indicate by how much percentage the lending rates would be reduced since it will be based on the individual bank’s choice.

In the press statement, the UBA chairperson, Mr Mathias Katamba, said: “Financial Institutions are the main arteries through which monetary policy is transmitted and in challenging times like these, the membership of UBA wish to convey their unwavering commitment to do whatever is possible within their means and circumstances to support initiatives by Bank of Uganda (BoU) to stimulate economic activity.”

He added: “We agreed that each other and every individual member institution goes back and reviews their internal position and adjust their lending rates accordingly, based on whatever they can accommodate since institutions differ in composition and make up their cost structures, assets and liabilities.”
The UBA members said the industry, with guidance from BoU, is currently undertaking loan restructures for qualifying borrowers as part of the efforts to address cash flow challenges occasioned by interruptions of supply chains and overall business stress.

UBA said the meeting also agreed to separately engage BoU and the government through the Ministry of Finance on specific and urgent pain points the industry is faced with that are constraining their operational efficiency, exposing them to risk and bearing to loan pricing and other tariff structure.

Other support from UBA
Explaining the positive development that UBA as an institution has done, it says between March and May when the lockdown was effect, financial institutions completely waived off fees for banks to wallet transaction as well as for transactions below Shs50,000 at ATMs and Agent Banking points are now more than13,000 across the country.

In the statement, UBA said their members also mobilised support towards the fight against Covid-19 in cash and kind of Shs3 billion.

In responding to Daily Monitor’s inquiry on July 11, the director of communications at BoU, Ms Charity Mugumya, said: I have seen UBA media release you had asked about earlier. It is a welcome move and we look forward to their commitment. It is really a good move because they have responded to the governor’s call, which is good for the industry and the economy as a whole because it will give some relief on the high cost of credit.”