The Independent Uganda: You get the Truth we Pay the Price
Kampala, Uganda | THE INDEPENDENT | The Commercial Court judgment against Diamond Trust Bank-DTB will have wider repercussions across the entire economy in terms of the cost of credit.
On Wednesday, the Head of the Commercial Court, Justice Henry Peter Adonyo ruled that the credit facilities DTB-Kenya offered to local businessman, Ham Kiggundu is illegal since it is not licensed by Bank of Uganda as required under the law to carry out financial business in Uganda.
Kiggundu sought a declaration that the bank’s demand for US$4,014,444 and US$6,974,600 that was advanced to him by DTB-Kenya is illegal and unenforceable on grounds that the Kenyan bank wasn’t licensed to carry out business in Uganda.
The judge ruled in his favour and ordered the bank to refund Shillings 120bn that they recovered from his account. The judgment sent the banking fraternity into a tailspin. Uganda Banker’s Association described the judgment as reckless in a statement.
Speaking during a ZOOM meeting on Saturday evening to discuss the case amongst Uganda’s finance professionals and legal fraternity, Muhumuza said Uganda has limited capital, adding that it has been the practice for local banks to seek capital from abroad for local borrowers.
He said should the judgment stand, it will have a big impact across the entire economy including the insurance sector.
The judge rejected the argument from the respondents that DTB Kenya had appointed DTB Uganda, which is licensed to carry out business in Uganda to act as their agent.
Muhumuza says this will cause a jump in the cost of credit if financial institutions are unable to use the same arrangement to source foreign funding.
Dennis Otatiina, the Managing Partner of KO Advocates said Uganda is a prime destination for foreign capital to finance all kinds of projects including trade. He says if the appetite for foreign capital is to continue, then the regulation needs to be measured and the Bank of Uganda has to do something about the judgment.
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