Personal, trade loans dominate banks’ lending

Increase in credit to household and personal loans could be a signal to increased economic activity and the need to shore up Covid-related effects. PHOTO | FILE

Summary

• Of the Shs888b that was advanced to the private sector during  March, at least 26 per cent went to personal and household loans. Trade received the same share according to Ministry of Finance. 

By MARTIN LUTHER OKETCH

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Personal and household loans took the largest share of credit extension during March, according to the Ministry of Finance April Performance of the Economy Report. 
The segment, which according to the report, has been taking the largest share of commercial bank credit for about two years now, took 26 per cent, the same amount that went to trade during the period.

This, experts say, represents an increase in the appetite for credit as ordinary Ugandans seek avenues to shore up their businesses and households ravaged by Covid-19-related effects.    
Building, mortgage, construction and real estate took up 20 per cent while agriculture, which employs the largest portion of Ugandans, took 12 per cent.

The low extension of credit to agriculture is largely blamed on the reluctance by banks to offer loans to the sector due to associated risk of non-repayment. 
Business services, community, social and other services took up 9 per cent of approved credit in March, while 3 per cent went to transport and communication, electricity and water. Mining and quarry shared only 0.2 per cent of approved credit during the period. 
During the period, according to the report, the value of credit approved increased by 19 per cent, which represented a growth of about Shs140b. 

The report noted that approved credit grew from Shs748.1b in February to Shs888b in March, which signals the recovery in economic activity and growth in credit appetite. 
The biggest growth in approved credit during the month was registered in the building, mortgage, construction and real estate sector, which grew by 88.2 per cent followed by trade (64.2 per cent) and business, community, social and other services (27.2 per cent). 

During the period, according to the Ministry of Finance, credit to agriculture grew from Shs98.2b to Shs106.6b while loan extensions to trade grew from Shs163.6b to Shs227.9b. 
Advances to building, mortgages and construction grew from Shs92.5b to Shs180.7b while those to business services grew from Shs48.3b to Shs75.5b. 
However, other sectors including manufacturing and personal and household loans experienced declines, according to the report. 

For instance, the report noted, advances to personal and household loans declined to Shs227.2b down from Shs247.7b during February.   
Transport and communications experienced the biggest decline from Shs37b in February to just Shs400m during March. Manufacturing saw approved loans decline to Shs38.3b down from Shs58b.