Banks avail more cash for oil and gas lending

Wednesday August 8 2018

With the oil prospects nearing the peak, banks

With the oil prospects nearing the peak, banks are lining billions of money to lend to companies involved in the sector. FILE PHOTO 

By Eronie Kamukama

Kampala. Uganda’s banks are increasingly getting interested in Uganda’s oil and gas sector.
Three weeks ago, Barclays Bank, now trading as Absa, made known its intentions to utilise opportunities in the oil and gas sector.
The move is part of a larger plan to grow the bank’s balance sheet and profitability.

The most recent bank to make a move is Equity, which has made available more than $250m in credit for individuals and companies interested in the oil and gas sector.
Equity Group has operations in six African countries with a capital base of nearly $1b.

Central Bank regulations dictate that the bank can only avail a maximum of 25 per cent of the bank’s capital.
In a press briefing during celebrations to the bank’s 10 years in Uganda, Mr James Mwangi, the Equity Group managing director, said they can now give a single loan of $250m to an individual or more people who have the right business plan for the oil and gas sector.

“You can borrow from a bank that is 75 per cent the size of the industry which would instead require five or six Ugandan banks to syndicate the $250m loan facility,” he said.
The bank is now eying global companies to expand its capacity to facilitate oil and gas sector activities in the country. “Equity has had strong lines of credit with African Development Bank, International Financial Cooperation, European Investment Bank, China Union Bank and among them, they have put lines of another $1b. So we can syndicate with them beyond the $250m,” Mr Mwangi said.

With more than 600,000 customers, Equity Bank has, in the last 10 years, grown its deposits to Shs750b, with an asset base of Shs1.1 trillion.
The bank ended 2017 with a Shs38b profit before tax and is currently focusing on long-term investments in innovations and agency banking.

Central bank clarifies

At the same function, Mr Louis Kasekende, the Bank of Uganda deputy governor, said recent reports saying that the Central Bank will not bail out distressed banks, were quoted out of context, saying the governor’s remarks have been directed at banks with insolvency and not liquidity problems.

“We represent and protect the interests of depositors. If an institution is insolvent, that means that shareholders can no longer support it and it should not remain in business. How shall we regulate an institution we own? We shall use bank resources to provide liquidity to an institution with liquidity problems and we shall not use our resources to bail out insolvent institutions,” he said.