Business

EXCLUSIVE: Ugandan Banks Write to BoU over Branch Operating Hours, Credit

CORONAVIRUS UPDATE

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Commercial banks have asked for a relaxation of regulations by Bank of Uganda (BoU) to allow them sail through the Coronavirus crisis unscathed.

Uganda has so far registered 14 cases, sending shockwaves in the economy.

Government has since restricted public transport, urged people to stay indoors and maintain a social distance as measures aimed at preventing the spread of the pandemic.

Uganda Bankers’ Association (UBA) Executive Director Wilbrod Humphrey Owor said in a letter to BoU Director Supervision Twinemanzi Tumubweine that staff at branches have “continued to highlight health, safety and security risks in the current environment” as a result of “additional control measures and restrictions” pronounced this week especially those relating to public transport and by extension non-food businesses.

ChimpReports understands UBA members held a meeting today in Kampala to discuss the impact of the Coronavirus on their businesses and how to cope in these challenging circumstances.

Consequently, the banks requested BoU to urgently consider that “branch operating hours (opening and closing) be changed to 9:00am to 3:00pm on week days” and that “branches remain closed on Saturdays and Sundays.”

The bankers also resolved that the decision and consequently notification not to operate a branch where circumstances dictate be individually left to and handled by each member bank to BoU.

UBA told Twinemanzi that its member want the central bank to “urgently respond/provide guidance” on the specific tasks stipulated in the industry requests “especially regarding credit.”

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As the coronavirus continues to roil Uganda’s tourism after the airport and borders were closed, leading to widespread business shutdowns across the country, bankers are evidently worried of tough times ahead.

Loans

On March 19, 2020, UBA asked BoU to allow them carry out more than two restructures.

The Coronavirus threat threatens Ugandan businesses with those indebted facing dire consequences.

In light of this situation, UBA wants its guidance on banks allowing borrowers arrange to pay back their debt in a different way or at a later time than was originally agreed.

The banks also want BoU allow their extension of classification cycles, timelines for downgrading, provisioning; penalties regarding breach of Non-performing loans thresholds among others and ”effective dates for these measures preferably from mid February 2020 when we first highlighted the risk at the governor’s meeting.”

The Ugandan economy was continuing to perform well, with growth expected to reach 6 percent in FY 2019/20, a minor slowdown from the earlier projection of 6.3 percent.

The rebasing of the GDP pointed to an increase in the size of the economy by 11.6 percent.

However, Budget execution has been challenging among revenue shortfalls and large expenditure pressures, and delays in the implementation of externally-financed projects.

While other countries like Kenya have rolled out their tax reliefs; injected millions of dollars to save vulnerable people; reduced salaries of senior government officials; and lowered the Central Bank Rate to prompt commercial banks to lower the interest rates to their borrowers, hence availing the much needed and affordable credit to MSMEs across the country, President Museveni is yet to speak out on how intends to save the economy.

Kenyan president Uhuru Kenyatta earlier this week said the central bank would provide additional liquidity of Ksh 35 Billion to commercial banks to directly support borrowers that are distressed as a result of the economic effects of the COVID-19 pandemic.

The Central Bank of Kenya shall provide flexibility to banks with regard to requirements for loan classification and provisioning for loans that were performing as at March 2,2020 and whose repayment period was extended or were restructured due to the pandemic.

Just like Kenya, Uganda needs a stimulus package to help companies and protect workers and other vulnerable groups affected by the escalating coronavirus.

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