Contractors want commercial banks to reduce lending rates
Posted Friday, May 30 2014 at 01:00
Construction industry players have outlined delayed payment and high cost of doing business as some of the major constraints that continue to undermine the sector’s growth.
According to the Chairman of Uganda National Association of Building and Civil Engineering Contractors (UNABEC), Mr Jonathan Namugowa Wanzira, such challenges stifle the capacity of local contractors to compete favourably with their foreign counterparts.
Speaking last week during the signing of a Memorandum of Understanding between the Uganda Small Scale Industries Association (USSIA) and UNABEC, Mr Wanzira said: “In China, the rate at which the contractors borrow is several times much lower compared to about 30 per cent that we are being charged on loans here,” he added, saying this is further complicated by the shorter repayment period, something he said does no good for a local contractor in strict business terms.
For nearly two years now, Bank of Uganda has asked commercial banks to lower interest rates although this is yet to happen despite the Central Bank adjusting (downwards) its lending rate (CBR).
The Uganda Bankers Association has maintained that it is up to the 26 commercial banks in the country to decide to lower interest rates given that this is a liberalized economy where government has no hand in how private companies are operated.
The good news, however, according to Mr Wanzira, is that the Department for International Development, under its capacity development initiative, has a grant that provides up to 50 percent guarantees to contractors seeking bank loans for their projects.