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Bankers Banking on COVID-19 Cure, Vaccine for Sustainable Recovery

UBA Executive Director, Wilbrod Owor says the restructuring has seen the lenders extend the repayment period of loans worth Ushs7.3 trillion. He says that as the COVID-19 cases reduced and the measures were lifted, the business, as well as the banking industry, started picking up, but unfortunately, this has been disrupted again.
13 Jul 2021 21:26

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The financial sector is now hoping in the possibility of vaccines, treatment and COVID-19 cures, for the banking sector and the economy as a whole to gain sustainable recovery.

While the sector has not been hit badly as other sectors like education, tourism and transport, the business has seen the profits decline while some operators have made losses.  

However, the main concern for the financial sector is the distress that other sectors are in, with many of them failing to recover since the onset of the pandemic more than a year ago.  The Uganda Bankers Association (UBA) says even others especially in the micro, small and medium (MSMEs) segment that had started picking up, have again suffered a setback because of new lockdown measures targeting the second wave of the pandemic. 

This means that even those companies that were starting to service their loans, will again find it hard to continue paying back. At the beginning of the first wave, the banking industry introduced measures to cushion the private sector from the shocks of the pandemic, by suspending some costs, a moratorium on loan repayments, as well as restructuring of credit. 

This was a response to the falling businesses, disruption of the supply chain and the blocking of cash flows for the customers. UBA Executive Director, Wilbrod Owor says the restructuring has seen the lenders extend the repayment period of loans worth Ushs7.3 trillion. He says that as the COVID-19 cases reduced and the measures were lifted, the business as well as the banking industry started picking up, but unfortunately, this has been disrupted again.

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Early last month, the Bank of Uganda Governor Emmanuel Tumusiime Mutebile expressed fear that the banking sector might not be able to offer relief measures if a new lockdown was announced, as was the case during the first wave. 

He indicated that this was because the banking sector and the economy as a whole were not doing well. He announced a cut in the Central Bank Rate to 6.5%, the lowest ever, to enable commercial banks reduce lending rates and attract borrowers to boost the economy. 

He said the economy was expected to grow by up to 4.5%, but feared that another lockdown would affect this growth. Just over a week later, a new lockdown was announced, closing down private transport, education and partially tourism. 

He also hoped for the success of the vaccine programs, which would lead to the easing of the business environment. As has been with most businesses, the pandemic has highlighted the need for the banking industry to adapt to digital innovation, to overcome some of the bottlenecks posed by COVID-19. 

Fortunately for the bankers, they were already digitally migrating most of their operations mainly to cut the cost of doing business and improving the customer experience.   

UBA Chairman Mathias Katamba says that as more of the other sectors, which are customers to the banking sector, go digital, the bankers hope that this will has a positive and sustainable effect on the economy.

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UBA is scheduled to hold its fourth Annual Bankers Conference later this month, which is expected to focus on innovation and the survival of the industry. The conference under the theme: "Bend but Don't Break, How the Financial Sector can thrive in the era of the 4th industrial revolution", comes at a time the financial sector is being integrated with others like telecommunication through digitalization. 

Last year, the conference did not take place because of the pandemic, and this time around, it will largely be virtual, for local, regional and international participants. 

The Mastercard Foundation, which supports financial inclusion by supporting the private sector, says there is need for concerted efforts to ensure the vulnerable MSMEs are especially protected. Mastercard Country Manager for East Africa Shehryar Ali says Covid 19 has demonstrated that no section can thrive without the others.    

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