Banks close 14 branches, shift operations to digital channels   

During 2020, commercial banks also registered a drop in automated teller machines (ATMs) from 851 in 2019 to 837. PHOTO |  FILE

What you need to know:

  • According to the Bank of Uganda report for the period ended December 2020, commercial banks registered a decrease in branch numbers and ATMs.

Banks at least closed down 14 branches for the period ended December 2020, according to the Annual Supervision Report. 
The report, which details operational activities in the banking sector, indicates that the number of commercial bank branches dropped to 566 in the period ended December 2020 down from 580 during the same time in 2019. 
The sector also registered a drop in automated teller machines (ATMs) from 851 in 2019 to 837 in the period under review.
This drop, the report indicates had been a result of increased preference to digital channels such as Internet banking, mobile banking, mobile money and agent banking, whose demand has been pushed up by the outbreak of Covid-19. 

However, the report also noted constraints coming directly from Covid-19, which continues to adversely affect the financial sector, resulting into a decline in earnings and quality of banking assets, among them loans.
The negative effect of Covid-19 has also forced banks to shift some of their activities on digital channels, which continue to introduce a number of innovations in a sector that is overly regulated and highly traditional. 
In notes published along the report, Bank of Uganda Governor Emmanuel Tumusiime Mutebile said during the year 2020, Covid-19 had caused considerable disruption to the financial health of corporate entities and households across all sectors of the economy. 
However, he said, the performance of supervised financial institutions was not adversely affected by Covid-19 induced disruptions, much of which were more visible in the first half of 2020. 

Credit reference services, among which include financial cards, the Central Bank said, which are issued to borrowers recorded a 10.3 increase as of December 31, 2020, growing to 1,968,620 from 1,785,512 in the same period 2019. 
During the period, the report indicates, the number of branches of participating institutions installed on the credit reference bureau system increased from 591 to 598. 
There about three companies that offer credit reference services including Credit Reference Bureau.
However, according to the Central Bank, the number of enquiries made to the credit reference bureaus decreased by 34.41 per cent from 1,236,126 as of December 31, 2019 to 810,782 on account of reduction in credit applications and enquiries during the lockdown.
During the year, there was licensing, approvals and expansion particularly to Centenary Rural Development Bank Limited, which undertook a corporate re-organisation exercise, leading to the creation of Centenary Rural Development Group Limited as the majority shareholder effective July 1, 2020.

In addition, NC Bank Uganda and CBA Bank Uganda Limited underwent a business amalgamation process that created NCBA Bank Uganda effective June 15, 2020. 
The also noted that during the year, Bank of Uganda considered an application from Yako Bank Limited, previously a microfinance deposit-taking institution for a licence to conduct business as a credit institution (Class 5). The licence was granted on May 26, 2020.
The report further indicated that in February 2020, Bank of Uganda through the Minister of Finance sought a legal opinion from the Attorney General on the full implications of the regulatory regime for large Saccos following the enactment of the Cooperative Societies (Amendment) Act, 2020.

The report also shows that in October 2020, the Attorney General opined that Saccos that fall under the Microfinance Institutions and Money Lenders Act, 2016, are to be regulated and supervised by the Central Bank while the registrar of cooperative societies is still mandated to register and deregister cooperative societies.