The Independent Uganda: You get the Truth we Pay the Price
Ramathani Ggoobi, a policy analyst and lecturer for economics at the Makerere University Business School (MUBS) had earlier told The Independent that banks are trying to be innovative so as to capture everybody who would want to get into the credit area for them to make money but is not good for the economy.
He said the interest rates for micro-loans are very high compared with the rates being charged on conventional banking credit products, a scenario that is likely to make the population lose more money in interest payments.
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However, financial institutions have argued that the high risks involved with micro-loans are the reasons for the high interest rates.
Banking profits slowed down
This development comes at the time commercial banks are looking for avenues to attract more customers into the borrowing category as the banking industry grapples with slow private sector credit uptake as well as profit growth.
Data from Bank of Uganda shows that the country’s banking industry recorded a 10% growth in net profit to Shs 673bn for the year ended last December up from Shs 611bn in 2016 excluding Crane Bank and Shs541bn in 2015.
The slow growth has been attributed to slow private sector credit uptake as well as declining interest rates.In 2014, the banking industry, consisting of 25 commercial banks, recorded Shs485bn in net profit.
The industry’s deposits grew by 12% to Shs18.2 trillion last year, up from Shs16.2 trillion and Shs 14.2 trillion during the same period under review.
This is the same trend with loans and advances that increased to Shs 11.7 trillion last year, up from Shs11.5 trillion in 2016 and Shs10.8 trillion in 2015. The Non -Performing Loans fell to 4.9% from 10.5% and 5.3% during the same period under review.
Going forward, increased uptake for micro-loans is expected to contribute more to loans and advances for banks.
