Indiscipline leading to rise in loan repayment failure - expert

Monday September 9 2019

“Lending rates are prohibitive”

“Lending rates are prohibitive” 

By Christine Kasemiire

The increasing rate of business indiscipline and the rising cost of business has seen a rise in non-performing that the banking industry is currently grappling with, according to Enterprise Uganda.
Speaking, at a basic enterprise startup tools training in Kyegegwa District, Mr Charles Ocici, the Enterprise Uganda executive director, said both small and big businesses are increasingly hiding the truth from financial institutions and loan sources by forging books of accounts and giving wrong projections.
This, he said, has seen a number of businesses and individuals grapple with the challenge of servicing loans to the point of collapse, noting that this results from the fact that such business “owners present a wrong status of the company against which the loans are advanced.”
The training was organised by Enterprise Uganda with support from Kyegegwa District Woman MP Stella Amooti.
Mr Ocici noted that the irony of business fraud continues to grow with companies develop different books of accounts for bankers, tax authorities and personal use.
This, he said, is the basis on which banks have advanced huge some of money to business that eventually fail to pay thus increasing the rate of non-performing loans.
According to Bank of Uganda, non-performing loans currently stand at 4.3 per cent. However, this has been a continuous reduction from a rate of more than 10 per cent in 2011 when the economy struggled to shake off a number of volatilities.
Mr Joseph Amanya, one of the commercial farmers, who participated in the training, said it is disappointing to see that financial institutions have failed or refused to respond to market demands, key among them reducing the cost of lending.

Prohibitive lending rates

According to Mr Joseph Amanya, a commercial farmer: “Lending rates are prohibitive,” which could explain the rising failure of loan repayment. Currently, commercial bank lending rates oscillate between 19 per cent and 22 per cent.