Stanbic leads market in dropping prime lending rate

October 24, 2016 in Business, Companies, Finance, Financial Services, Markets, Policy by Editor

KAMPALA,OCTOBER24 – Stanbic’s Ugandan unit has shaved 100 basis points off its prime lending rate mimicking a similar move by the Bank of Uganda which dropped its key rate to 13percent last week.

Bur borrowers will have to wait for a while before the 21 percent rate kicks after the bank staggered it to December 1.

This is the fourth rate move by Stanbic although it remains 8 points above the CBR reflecting continuing caution as lenders weigh the near term impact of the central bank’s recent moves on the economy. The CBR has retreated 400 basis points since April as part of efforts to jumpstart lending to the private sector but lenders, trapped by high NPL ratios from 2015, are ill placed to adjust to the new rates as fast. Many lenders are still displaying primes as high as 24percent.

Stanbic’s announcement of a 21percent prime follows a drop in the CBR from 14 to 13 percent last week.

“We have been encouraged by the news and data coming from the central bank which suggests the economy is recovering. Our decision to reduce the rate is based on the prevailing economic conditions which are improving
and our policy of maintaining the transparency of our pricing to our customers, where we match any movements of the Central Bank Rate with adjustments to our prime lending rate,” said Patrick Mweheire, Stanbic’s Chief
Executive

However, Mweheire spoke for many in the industry when he said: “Despite signs of the recovery, we appreciate these are
still very challenging times especially for small scale businesses which constitute the bulk of the private sector and contribute immensely to GDP output. Giving them access to cheaper credit is therefore key to driving long term sustainable economic development.”