Non-performing loans increase to 5.4 per cent

Thursday July 29 2021

People queuing at a bank. As of March, according to the report, restructured loans under the Bank of Uganda Covid-19 credit relief measures amounted to Shs6.6 trillion of which Shs3.7 trillion remain outstanding. FILE PHOTO


Bank of Uganda has said commercial banks’ asset quality declined slightly, with the share of non-performing loans increasing to 5.4 per cent from 5.3 per cent.
As of December 2020 non-performing loans stood at 5.1 per cent but there has pressure due to loan repayment challenges that have been exacerbated by Covid-19 disruptions.
In its State of the Economy report for the period ended June, Bank of Uganda said the share of non-performing loans largely increased in manufacturing, business services and building and construction.
However, they registered a decrease in agriculture, trade and personal loans.
The decline in some economic sectors, the Central Bank said, was partly due to a gradual recovery in economic activity, following the lifting of the lockedown  in June last year as well as favourable credit relief measures that were instituted by Bank of Uganda last year.
During the period under review, electricity and water registered the highest percentage of non-performing loans, increasing to 17.1 per cent in the quarter ended March.  
This was followed by other activities (8.9 per cent), trade and commerce (8 per cent), mining and quarrying (7.6 per cent) and agriculture (7.3 per cent).
Building, construction and real estate registered non-performing loans of 5.8 per cent while personal and household loans registered 4.4 per cent.
Transport and communication (3 per cent), manufacturing (2.6 per cent) and social and other services (1.3 per cent).
During the period, the Central Bank noted, lending rates registered a gradual declined over the first half of the 2020/21 financial year, decreasing from 20.9 per cent by July 2020.
However, commercial banks have been reluctant to approve some loans due to risks, worsened by deterioration in assets quality resulting from reduced cash flows due to Covid-19 disruptions.  
Lending rates on shilling-denominated loans stood at 19.9 per cent in February while those on foreign currency-denominated loans increased to an average of 5.9 per cent.
However, according to Bank of Uganda, there was sustained growth in private sector credit, increasing by 10.1 per cent in February 2o21, up from 6.7 per cent in August 2020.