Rise in personal, household lending signals recovery

Personal and household loans continued to dominate private sector credit lending, signaling a reduction in risk averseness among commercial banks, according to the Ministry of Finance Economic Performance Report. 

The report, which measures performance of different sectors of the economy, indicates that personal and households have dominated lending since July suggesting recovery of individual incomes. 

For instance, out of the Shs1.068 trillion that was lent out in September, 23.1 percent, which was the biggest share in the period, went to personal and household loans. 

This was followed by trade, which took a 17.9 percent share while building, construction and real estate, which had earlier in the year shown signs of contraction due to risk related with real estate, took a percentage share of 16.6 percent. 

Manufacturing, which is still recovering from the effects of the June lockdown, took 15 percent while agriculture took 11 percent. 

During the period, according to the Ministry of Finance, credit worth Shs1.068 trillion was disbursed, which was a 30.1 percent increase from Shs821.4b. 

The report also indicates that at least 55.8 percent of the credit, which was applied for was approved for disbursement. 

Ministry of Finance also indicated that at least Shs7 trillions worth of loans were restructured through the Credit Relief Measures instituted by Bank of Uganda in April last year. 

However, Bank of Uganda has since limited credit relief to sectors that are still under lock, among them education and hospitality until September next year. 

The report also indicated an increase in lending rates, which during September rose to 19.05 percent for shilling denominated loans and 6.99 percent foreign currency denominated loans. 

Ministry of Finance noted that lending rates for shilling and foreign currency denominated loans had increased from 18.29 percent and 5.75 percent, respectively in August, which could be an indication of demand pressure. 

During September, outstanding private sector credit, increased to Shs18.44 trillion, which was an increase from Shs18.41 trillion in August due to higher credit extensions for shillings denominated credit. 

Shilling denominated credit stock increased by 0.4 percent thereby offsetting a 0.3 percent reduction in foreign currency denominated credit stock.