Ugandan Banks mobilise UGX16Trillion In Deposits

According to Kisaame, of the 16 trillion shillings in deposits, the banks have lent 12 trillion shillings to the private sector.
Former Governor of Central Bank of Kenya Prof. Njunguna Ndung'u receiving a gift from Japheth Kato, Chair of Stanbic Bank, at Uganda Annual Bankers Conference 2007 in Kampala.

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The 25 banks in Uganda have mobilised between them 16 trillion shillings, representing 17 percent of the country's Gross Domestic Product (GDP).

This has been disclosed by the Chair of Uganda Bankers' Association (UBA), Juma Kisaame, while making opening remarks at the ongoing inaugural Annual Bankers Conference in Kampala under the theme “The Future of Banking”.

Kisaame, also the Managing Director of dfcu Bank, says the 16 trillion shillings in savings and fixed deposits is what the banks use for short-term lending.

According to Kisaame, of the 16 trillion shillings, the banks have lent 12 trillion shillings to the private sector.

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Presently, commercial banks largely lend on short-term basis to the private sector. They also use much of the deposits to lend to the government via the government securities – treasury bonds and treasury bills.

Kisaame says commercial banks are dedicated to contributing to the national growth and development agenda through increased financial inter-mediation and innovations driven by digital and technological advancements.

According to Kisaame, the banks are also involved in corporate social responsibility (CSR) with the aim of improving the welfare of the people, adding that annually they inject billions of shillings in CSR.

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While delivering the keynote address, the former Governor of the Central Bank of Kenya, Prof. Njunguna Ndung'u, challenged Ugandan banks to pursue financial inclusion of the people in order to deliver what he termed “complete financial infrastructure”.

Prof. Ndung'u says increased financial inclusion contributes to economic growth and development.

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Vice President Edward Sekandi, who opened the conference, appealed to commercial banks to reach those yet to embrace banking, especially in the rural area, start availing long-term financing and increase lending to the agricultural sector.

Prof Augustus Nuwagaba queried why Ugandan banks use the customers' savings to lend expensively to the private sector instead of also mobilising their own savings or borrowing from cheaper sources in order to lend.

He said it is self-defeating that banks pay negligible interest on customers' deposits and charge 26 percent interest on borrowing, adding that this unfairness must stop.

Presently banks' prime lending – to their most trustworthy clients – is at 20.5 percent, but the risky ones pay 25 percent or more in interest.