Banks raise Shs1 trillion to support local firms

Mr Wilbrod Owor, the chief executive officer Uganda Bankers Association. Photo by Faiswal Kasirye

What you need to know:

  • The economy has been faced with high interest rates north of 20 per cent for the last one year, which has partly contributed to the stagnation of the economy.
  • Speaking to journalists at the African Centre for Media Excellence on Wednesday, Mr Patrick Mweheire, the Stanbic Bank Uganda chief executive officer, said local companies, on top accessing high costs of production, have to compete with imports from countries such as China that are cheaper.

Kampala. Commercial banks are expected to pool about Shs1 trillion to lend to local companies in order to boost the slowing economy.
The banks will boost companies producing products, employing Ugandans and providing services.
Termed as the “Local Content Stimulus Package,” the banking sector expects that it would stimulate businesses.
“The banks are raising at least 10 per cent of their assets towards the package. This is to address the challenge of aggregate demand that the economy has been facing. We believe that if we stimulate local content, then it will in turn, stimulate the economy,” Mr Wilbrod Owor, the chief executive officer of Uganda Bankers Association, told the Daily Monitor in a telephone interview on Thursday.

The economy has been faced with high interest rates north of 20 per cent for the last one year, which has partly contributed to the stagnation of the economy.
Statistics indicate that private sector lending has slowed down as banks turn away risky customers.
According to Mr Owor, the package will not be priced at the same rates as the currently existing lending rates.
“It will be priced at competitive rates because it is a stimulus package. The terms will be different from the loan arrangements that banks have been giving,” he said.
The details of the package and other terms and conditions are expected to be announced at the official launch in mid-October.

Market edge
Speaking to journalists at the African Centre for Media Excellence on Wednesday, Mr Patrick Mweheire, the Stanbic Bank Uganda chief executive officer, said local companies, on top accessing high costs of production, have to compete with imports from countries such as China that are cheaper.
“The idea was for us to get banks to allocate some money to drive a particular initiative that can boost local content. For instance, if there is a school that can churn out 2,000 fabricators between now and sometime next year, then they will come on the priority list,” he said.