Business

Interest rate declines to 21.7 per cent

Share Bookmark Print Rating
By MARTYIN LUTHER OKETCH

Posted  Friday, August 22   2014 at  01:00

In Summary

Rate had been hovering around 28% for more than a year

SHARE THIS STORY

KAMPALA

The effect of high interest rates on the borrowing public has slightly eased following a 6.3 per cent reduction over the past 12 months to 21.7 per cent.
The reduction in the commercial lending rate has been attributed to the low Central Bank Rate and the improvement in Uganda economic environment.
Due to a difficult economic environment and a high Central Bank Rate, the average commercial lending rate had been hovering at a height of 28 per cent.

However, there has been a remarkable reduction in the lending rate, which in some has relieved the public from the burden of high cost of credit from commercial banks for enterprise expansion.
The director research Bank of Uganda, Dr Adam Mugume, said last week the average lending rate on shilling denominated loans remained relatively stable averaging 21.7 per cent in the quarter that ended on June 30.

“Indeed, lending rates have remained sticky, declining only marginally, in part reflecting: asymmetry of the monetary policy transmission mechanism, lagged response to monetary policy impulses, and probably heightened risk aversion by commercial banks,” he said.
Dr Mugume said time deposit rates on shilling loans have also remained relatively stable, averaging 11.3 per cent since June 2013.
For the case of foreign currency loans, Dr Mugume said the average lending rates on foreign denominated loans also remained stable ,declining only marginally to 9.2 per cent from 9.5 per cent in March.

CREDIT STANDARDS

The June 2014 credit survey done by the Bank of Uganda and contained in its economic report for August indicates that credit standards in quarter one of 2014/15 are expected to remain broadly unchanged, with a bias towards net easing for both enterprises and households. The central bank says this is due to the availability of shorter term liquidity, policy diversification aimed at easing credit access to SMEs, continued improvement in the economic environment, and increased focus on consumer credit.

moketch@ug.nationmedia.com