KAMPALA —Tropical Bank Uganda Limited is embroiled in a contentious loan dispute with Prime Finance Company Limited, sparking concerns over the bank’s credibility, that has attracted the attention of Bank of Uganda.
Despite a court order, Tropical Bank and its client, IT Office (U) Limited, have failed to repay a UGX. 6.840 billion loan, now amounting to over Uganda UGX. 21 billion.
In March 2020, Prime Finance Company extended a Uganda Shillings 5.7 billion loan to IT Office (U) Limited at 5% monthly interest for four months. Tropical Bank, as IT Office’s banker, provided an irrevocable undertaking to repay the loan in case of default.
Sources indicate that senior bank officials followed internal procedures when signing the undertaking. However, Tropical Bank’s Board of Directors claims the transaction was fraudulent and has refused to repay.
The Bank of Uganda advised Prime Finance Company to seek remedies under the Contract Act 2010. A court ruling on August 30, 2021, ordered Tropical Bank to repay the loan with interest, but no payment has been made.
This dispute has led to internal strife, with former executives resigning amid conflict of interest and power struggle allegations. The Libyan government-owned bank’s reputation is at risk.
The unresolved loan has significant implications, damaging Tropical Bank’s reputation, threatening Prime Finance Company’s financial stability, and potentially undermining Uganda’s banking sector’s credibility.