GTBank bets on SME financing after downgrading to credit institution

GTBank downgraded to a credit institution due to inability to meet required minimum capital. Photo / File 

What you need to know:

  • GTBank believes targeting SME financing is the right decision considering global economic realities

After falling short of minimum paid-up capital for commercial banks, Guaranty Trust Bank has shifted attention to funding small and medium-sized businesses to shore up its balance sheet.

The bank indicated that it “believes this is the right decision considering global economic realities,” following extensive consultation with Bank of Uganda. 

The Ministry of Finance raised the minimum capital requirement to Shs120b in 2022, and is further expected to cap to Shs150b by June. 

The move, government has previously indicated, seeks to protect financial institutions and the banking industry from economic shocks.  

However, due to its inability to increase its capital base to the required levels, GTBank, together with Opportunity Bank and ABC Capital Bank, made a strategic decision to downgrade to credit institutions, which Bank of Uganda approved last month, and they were given three months from April 1 within which they have to implement the transition. 

“We are now betting on retail and SME financing, but nothing else is changing,” Mr Nuhu Tigawalana, the GTBank spokesperson, said last week, noting that these will take up the cooperate financing provision that the bank has been offering. This in a way, the bank noted, is consistent with its capital structure and will enable it to achieve its primary strengths by lowering the cut-off figures it sets for credit extension to borrowers.

Mr Jubril Adenji, the GTBank Kenya managing director and head of the East African region, said as the bank implements the transition, it we will continue to review its positioning within the Ugandan banking sector in line with its objective of maximising shareholder value. 

“As a group, we are confident of Uganda’s trajectory as a country, remain committed to championing growth and expanding innovative financial services across Africa, and will continue to explore viable opportunities in both existing and new verticals that guarantee the best use of the available capital,” he said

Bank of Uganda data indicates that as of September 2023, at least 18 of the 25 commercial banks had complied with the new capital requirement.