In Kampala we seem headed for a real estate problem. Many buildings stand with a paltry number of tenants or are completely empty. The likelihood of loan default, a strong possibility. The issue is; we have no middle class.
The creation of the middle class is shaped by certain factors, particularly access to capital and credit.
What we need to do is to use the tools which are already available to fix the problem.
1. Bank lending practices must be overhauled into a robust consumer accessible system by instituting fair and non-usury regulations which protect consumers from the demand of collateral as equity and unscrupulous lenders.
2. A universal Fair Credit Act with a Consumer Bill of Rights. The consumer bill of rights should be phrased to the comprehension of the most basic understanding. This would equally protect financial institutions as well as consumers with transparency. A fair credit act can be applicable to any consumer with an account in any and all regulated financial institution regardless of one’s status. Consumers would have a credit score known as a Credit Bureau Record (CBR).
This CBR would be calculated based on debt to income ratio.
The current CBR meandering within banks is limited in scope and its true calculus remains somewhat of a mystery.
3. The reintroduction of locally based Credit Unions to boost participation in banking and savings.
4. Bank of Uganda should lower its interest rates. This will in turn lower interest rates of regulated lending institutions. Some private banks have a graduated interest system. The longer the terms, the higher the interest. This can best be described as absurd. How does one progress with their family to middle income status when, if one wants to buy a home with a mortgage and is subject to twenty five percent interest on a loan beyond 2 years. Absolute insanity!
5. Establish a consumer trade commission for oversight. It should be an impartial body whose members are drawn from the banking sector, government and private citizens.
6. Establish a minimum liveable wage based on the average rate of annual inflation. This would assist those in the upward mobility trend, affordable housing.
The argument that minimum wage causes inflation is from those that engage in skulduggery. Let us employ proven sociopolitical economics.
This task is not easy but it is possible. Every day that passes costs us progress and development.
It’s time to transform Uganda into a more dynamic, energetic, competitive, and prosperous nation.
Martin Aliker Jr.