Loan approvals, applications abandoned in the last three months

By MARTIN LUTHER OKETCH

Loan applications fell in the quarter ended in August, according to data from the Bank of Uganda.

The fall, the central bank said, is the result of the slow economic recovery, with banks remaining cautious about what and to whom they lend.

During the period ending in August, according to the Central Bank, loan requests fell to 3.86 trillion shillings from 5.41 trillion shillings in the quarter ended in May.

This, the Bank of Uganda said, may have been the result of reduced demand for loans, compounded by a decline in the value and quality of assets.

The data also shows that loan approvals fell to 2.26 trillion shillings during the period, from 2.36 trillion shillings in the quarter ended in May, driven by a cautious approach taken by banks due to fear of the risks associated with Covid-19.

However, in highlights published in the Monetary Policy Report, the Central Bank said the economy had started showing sufficient recovery, spurred by an increase in the use of vaccination, which could lead to the reopening of certain critical sectors of the economy.

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A number of economic sectors have remained closed for almost two years now, threatening to turn into a crisis that could have wider economic ramifications.

For example, the education sector, which holds nearly Shs 2,000 billion in bank loans, remained closed, crippling its ability to repay credit facilities that were already under obligation.

Last week, an umbrella organization that brings together private school owners, noted the urgent need to intervene to save suspicious private schools that continue to choke on loans and fail to respond to operational departments of based.

It was also noted that private schools will need a stimulus package of around 500 billion shillings to bring the operations of various schools back online.

During the period up to August, the Central Bank noted, the personal and household, agriculture, manufacturing, trade and building-mortgage-construction and real estate sectors were the most active in terms of loan applications.

The Central Bank also noted that in the quarter ended in August, credit to the private sector increased 9.44 percent from 7.37 percent in the quarter ended in May.

Growth, the Bank of Uganda said, was subdued in June and July, but picked up in August due to the easing of lockdowns in July.

The Bank of Uganda also noted that during the period, interest rates fell to an industry average of 17.2 percent, from 18.8 percent in the quarter to May. , in accordance with the accommodative monetary policy.

However, some sectors such as commerce and lending to households and individuals experienced volatility with lending rates falling from 16.3 percent on average to 18.3 percent.

Interbank interest rates remained well anchored around the central bank (CBR) rate, with the seven-day rate remaining relatively stable at 6.77 percent.

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