Interest rates on salary loans drop 

Bank of Uganda noted that the lending rates in most sectors continue to exhibit significant volatility thus it is difficult to project in which direction they are likely to move going forward. PHOTO | FILE

What you need to know:

  • The low collections. During the period, the Central Bank indicated, seven-day interbank weighted average rate declined to 6.78 percent from 7.02 percent in the quarter ended December 2021, reflecting stability in the interbank money market. 

Interest on personal and households loans, among which included salary and others unsecured loans, declined in the quarter March, signaling increased confidence among lending institutions due to a steady recovery of the economy from effects Covid-19. 

During the period, the Bank of Uganda Monetary Policy Report, indicates that interest rates on personal and households loans dropped to 19.9 percent down from 23.9 percent in the quarter ended December 2021. 

Transport and communication, Bank of Uganda indicated, was the other sector where interest rates dropped, falling to 16.3 percent while agriculture posted a nominal decline to 20.7 percent. 

Manufacturing and trade also posted declines with interest, dropping to 16.2 percent and 17.9 percent, respectively. 

However, the Central Bank noted lending rates for electricity and water, building, mortgages, construction and real estate and other activities rose due to existing threats and instability in some sectors of the economy. 

Bank of Uganda also noted, the lending rates in most sectors continue to exhibit significant volatility thus it is difficult to project in which direction they are likely to move going forward. 

During the period, the Central Bank noted that private sector credit, which is one of the measures of economic performance, remained weak and below historical trends, despite full reopening of the economy in January. 

During the period, Bank of Uganda data indicates, foreign currency-denominated loans grew to 5.6 percent compared to 3.6 percent, while shilling-denominated loans fell to average by 9.8 percent from 12.0 percent. 

However, the Central Bank noted that credit growth remains weak in agriculture, trade, and other business services with growth rates far below the industry median growth in recent decade. 

The sectors above accounted for 34.2 percent of total private sector credit.

The Central Bank also indicated that credit growth is only above or near its median growth rate for the last decade in the personal and household loans sector, manufacturing, and building, mortgage and construction, with annual growth rates of 17.5 percent, 13.7 percent, and 13.2 percent, respectively. 

The three sectors above during the period, accounted for 52.7 percent of total outstanding credit during. 

Outstanding private sector credit due to agriculture and trade stood at a combined average of 29.4 percent. 

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