BoU speaks out on Ham-DTB loan case
The governor Bank of Uganda, Mr Emmanuel Tumusiime Mutebile
What you need to know:
- Prof Tumusiime Mutebile, the Governor at BoU, says the Institution does not regulate the extension of loans, the financing of commercial transactions that are funded using funds obtained from foreign banks that do not take deposits from the public in Uganda.
Bank of Uganda (BoU) has said that foreign financial institutions that do not use locally-raised deposits to lend to Ugandan entities do not require the authorisation of the Central Bank to be able to lend locally.
Prof Tumusiime Mutebile, the Governor at BoU, says the Institution does not regulate the extension of loans, the financing of commercial transactions that are funded using funds obtained from foreign banks that do not take deposits from the public in Uganda.
“BOU does also not regulate Institutions using funds of International, Regional or Local Development Finance Institutions whether such funds are advanced and administered directly by those institutions or through financial institutions in Uganda,” he said.
This development comes at a time when Hamis Kiggundu and DTB Uganda and DTB Kenya, are embroiled in a controversial Commercial ruling by Justice Henry Peter Adonyo which indicated that DTB Kenya had flouted the Financial Institutions Act (FIA) 2004.
Justice Adonyo said DTB Kenya had broken the law when it extended credit facility worth $4.5 million to businessman Mr Kiggundu and his Kiggs International (U) Ltd and Ham Enterprises Ltd without seeking approval from the Central Bank.
On Agency Banking, Prof Mutebile said that International and Regional Development Organizations, Foreign Banks and other lenders both local and foreign who may choose to appoint any entity or person to act as their agent in Uganda under general contract law, do not require approval from BOU.
“Such agencies do not fall within regulated agency under the FIA, 2004 and do not require a BOU license,” he said.
The case
Last week, the Commercial Court declared the lending transactions illegal and invalid for violating the FIA. Court then proceeded to declare Mr Kiggundu’s debts as settled by law as well as released all the mortgaged property.
Court also ordered the BTB Kenya and DTB Uganda to refund Shs34b and $23.2m (Shs86b) which they allegedly deducted from Ham Enterprises’ accounts.
