NPL rate rises to 10.5%

What you need to know:

  • The executive director of research BoU, Dr Adam Mugume, said growth in Private Sector Credit improved somewhat in the quarter to December 2016, growing on average by 5.3 per cent on annual basis compared with minus 0.2 per cent in Quarter three in the same year.

Kampala. After a slight decline in the levels of 7.7 per cent, the rate of Non-Performing Loans (NPL) in Uganda’s banking industry has increased to 10.5 per cent, the highest in more than a decade.
This rise puts a lot of pressure on bankers to ensure that they work on the levels of quality of assets in their respective banks.

Private sector credit
The highlights in Bank of Uganda (BoU) Monetary Policy Report (MPR) for February 2016 reveal that asset quality, as measured by the NPLs deteriorated in December 2016, with the NPL ratio increasing to 10.5 per cent of total loans, up from 7.7 per cent in September 2016.
“The rise in NPLs is likely to increase risk aversion amongst lenders and consequently weaken private sector credit growth going forward, which could in turn affect economic activity,” said the Central Bank.
Last week, BoU executive director supervision Justine Bagyenda said there were bad debts which were under watch at the time when the NPL in banks had come to 7.7 per cent in September 2016.
She said these debts have now been included in the level of Non-Performing Assets in banks leading to rise in the NPL levels.
However, she said depositing in the troubled former Crane Bank Limited was going on normally even when it was under the management of BoU before it was eventually taken over by dfcu Bank.
Ms Bagyenda refuted allegations that when the bank was under the BoU management, people were only withdrawing money as opposed to depositing.

“People were depositing money; the net deposit was higher than the withdrawals,” she said.
In response to the rise in the NPL level in banks, the managing director of Centenary Bank, who is also the chairperson of Uganda Bankers Association, Mr Fabian Kasi, said: “It is alarming because we have not had such high level of NPL in Uganda’s banking industry for long.”
The executive director of research BoU, Dr Adam Mugume, said growth in Private Sector Credit improved somewhat in the quarter to December 2016, growing on average by 5.3 per cent on annual basis compared with minus 0.2 per cent in Quarter three in the same year.