Before 1906, there was no banking institution in Uganda until November of the same year when the national Bank of India opened its first branch in Entebbe, and four years later it opened the first bank in Kampala, although it was later taken up to become Grindlys Bank.
The National Bank of India was followed by Standard Bank of South Africa Limited when on September 19, 1912, it opened its first branch in Kampala. And a few years later it opened another branch in Jinja.
Barclays followed in 1927 when it opened two branches in Kampala and Jinja. In 1954 three more banks; Bank of Baroda, Bank of India and The Nedelandsche Handel-Maatschappij M.V (Netherlands Trading Society) opened in Uganda.
According to Saben’s commercial directory and handbook of Uganda, as early as 1949 the banking system had been established in Uganda but did not control much of the financial liquidity that was in circulation across the board in the country.
“Much of the money was controlled in the bazaars and other channels which were predominantly controlled by people of the Asian origin. These people played a key role in the buying of cotton.
However, areas where banks were non-existent, merchants in those areas played the part of the banks. This was through taking drafts in exchange for cash or physical items in exchange for hard cash,” Saben wrote.
By 1950, it was realised that to bring more Africans into the business there was need to provide them with credit. Unfortunately, the commercial banks at the time would not extend credit to Africans because of the nature of their securities.
Under Ordinance number 20 of 1950 the Uganda Credit and Saving Bank was created purposely to extend credit facilities to Africans with the aim of furthering agriculture, commercial building and co-operative society purposes.
On October 2, 1950, the bank was opened and by 1961 it had spread to places like Arua, Fort Portal, Jinja, Soroti, Gulu, Masaka and Mbale, taking only African deposits.
Two years later, the first Building Society in Uganda was opened as a subsidiary of a Kenyan owned firm Savings and Loans Society Limited.
More financial institutions continued to open up in Uganda with Lombard Bank from Kenya, in partnership with Uganda Development Corporation, opening the Lombank Uganda Limited in 1958. It was this bank which first introduced the hire purchase system of shopping in Uganda.
It was not until 1966 that through an act of Parliament that Bank of Uganda was created. Prior to this, issues to do with money were handled by the East African currency board which had its head offices in Kenya.