President Museveni has cautioned managers of financial institutions against exposing customers to unnecessary risks, saying management has to go an extra mile in supervising lending which could be a recipe for disaster if not well monitored.
The President’s caution was particularly aimed at the management of the Finance Trust Bank that has upgraded to a commercial bank after operating as a Micro Finance Deposit-Taking Institution for years.
According to Mr Museveni, the expanded roles of the commercial bank demand for more stringent supervision as the risks involved also get bigger and complex. And if it is badly managed, he argued, will expose customers to unwarranted risks, something that the bank should guard against and not let it happen.
“When you become mature and deal in wide spectrum of products then that also comes with a lot of dangers,” President Museveni said last week while launching the Finance Trust Bank in Kampala. He continued: “The Board of directors should supervise lending because if it doesn’t, it could be dangerous for a bank that has come this far.”
In his speech, the Bank of Uganda governor, Mr Tumusiime Mutebile, said by November last year, nearly four months ago, that the upgraded bank capital base was Shs28 billion and about Shs43 billion was in form of customers’ deposits while nearly Shs60billion was in form of loans.
He said: “This requires diligent board of directors and senior management oversight. As for the Central Bank, we are committed to managing macroeconomics stability which is important for your operations and the sector.”
The Governor also warned the bank against money laundering activities, saying it is bad for the economy. He also revealed that regulation for Islamic banking is in the pipeline, implying that Islamic banking services will soon be available in the country as it is currently in the region and many other parts of the world.