Banks reduce lending to real estate, construction 

Whereas lending to real estate has been tightened, banks have eased loans for other sectors of the economy. Photo / Edgar R Batte 

What you need to know:

  • During the period ended June, banks reported “to have tightened credit standards to entities involved in building, mortgage, construction and real estate 

A Bank of Uganda report has indicated that banks have tightened lending to a number of sectors, which might signal rising exposure and high risk of default. 

In details contained in the Bank Lending Survey Report for fourth quarter to June, the Central Bank noted that during the period, banks had reported “to have tightened credit standards to entities involved in building, mortgage, construction and real estate. 

Other sectors included mining and quarrying, transport and communication, but eased lending for the remaining sectors of the economy.  

“The degree of net easing of credit standards decreased somewhat for most sectors in June 2023 when compared with the level of easing in the quarter to March 2023, except for personal loans and household and community, social and other services, which increased,” the report reads in part. 

The report further noted that net easing was highest for lending to personal and households at 38.8 percent, followed by trade at 13.9 percent. 

Community social and other service lending eased by 9.5 percent, agriculture (8.1 percent) while business services and manufacturing eased by 6.8 percent and 0.6 percent, respectively. 

However, tightening for building, mortgage, construction, and real estate stood at 39.4 percent, while mining and community social and transport and communication stood at 6.8 percent and 5.1 percent, respectively. 


Bank of Uganda noted that easing registered for majority of the sectors in the quarter to June 2023 was largely due to the increased demand for the back to school season, downward trend in inflation, especially for food supplies and a fairly stable business environment, which encourage trading activities. 

While on the other hand, tightening in the building, mortgage and real estate sector was mainly due to low property rates and decreasing occupancy levels.

Lending to the private sector continues to be muted, registering a mixture of flat growth and reductions. 

For instance, according to the August performance of the economy report, Ministry of Finance indicated that the value of credit approved in July had reduced slightly to Shs1.12 trillion from Shs118 trillion, representing an approval rate of 61 percent. 

Of the Shs1.12 trillion at 27.3 percent went towards trade, which was closely followed by personal and household loans at 26.5 percent. 

Other notable recipients included business, community, social and other services at 15.6 percent while agricultural received at least 11.9 percent. Building, construction and real estate received 11.2 percent.