Asset quality of country’s commercial banks still a concern, says Bank of Uganda

BoU Governor Emmanuel Tumusiime-Mutebile. The Governor says that although the banks are continuously improving on NPLs, the quality of the lenders’ assets still needs improvement. (MONITOR PHOTO)

KAMPALA – The asset quality of Uganda’s banking sector “remains a concern,” even as the country’s commercial banks performed better in the past fiscal year, Bank of Uganda (BoU) has revealed.

In the June 2018 Financial Stability Report Issue No.10 recently released in Kampala by the Governor Emmanuel Tumusiime-Mutebile, BoU said: “The ratio of Non-Performing Loans (NPLs) to total loans declined to 4.4 percent in the 12 months through June from 6.2 percent a year earlier, but “credit quality could be affected by indirect market risks arising from interest-rate policy expectations in advanced economies.”

Promising numbers

BoU further reports that on top of the total bank assets growing to UGX27.4 trillion from UGX24.8 trillion, NPLs decreased by UGX136.8 billion. “Annual write-offs remained historically high but reduced to UGX246.5 billion from UGX289.1 billion,” the report said.

The Bank projects that 2018/19 could see a build-up in risks, “especially from rising inflationary pressures driven by oil prices, and domestic risks arising from the increasing fiscal deficits and exchange rate volatility.”


The report indicates that the economy has signs of optimism in agriculture, construction, manufacturing and trade. However, more “increases in interest rates could heighten credit-default rates,” the Central Bank warned.

In the year to June 2019, the main focus for BoU will be on implementing the East African Community regional harmonised oversight and risk analysis policies for payment systems.





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