Uganda Nonperforming portfolio shrinks further
KAMPALA, JANUARY 05, 2015 – Uganda’s banking sector held on to the slim gains made against non-performing loans during the last quarter of fiscal 2014/15, shedding off another 0.1 percentage point during the first three months of fiscal 2015/16.
The Bank of Uganda says the Non-Performing Loans (NPL) portfolio had improved from 4.0 per cent in June 2015 to 3.9 per cent in September in 2015 on the back of an improved macroeconomic environment.
The central banker further says default rates among borrowers had stayed low despite higher lending rates. Toeing the BoU’s tight monetary policy stance and rising inflation, lending rates have continued to rise. Rates on shilling and foreign currency denominated loans rose to 23.9 percent and 9.1percent respectively in October 2015.
“The sustained improvement in loan quality across the banking industry during the year mirrors the improved performance of the economy,” says Justine Bagyenda, BoU’s Executive director for supervision.
Ms Bagyenda adds that capitalization levels had also improved over the period settling at 17 percent while return on assets was 3 percent.
The NPL portfolio has been on a steady decline falling from 5.6 percent (Ushs465.8 billion) in December 2013 to (USh.389.6 billion) 4.1 percent at the end of December 2014. However, there was also a significant write off of bad loans amounting to USh.317.9 billion in the year to December 2014.