Despite the disruption caused by Covid-19, commercial bank credit posted double-digit growth for the fiscal year ended 2020.
The growth is highlighted in a quarterly financial stability review of the Bank of Uganda, which notes that commercial bank loans brought in Shs 16.3 trillion, which represents a growth of 12.5% compared to 11.5%. % over the same period in 2019.
“Credit growth began to accelerate in the quarter through December 2020, signaling a potential recovery,” the report said. September.
During the period, loan extensions increased to 315 billion shillings from 186 billion shillings in the quarter to September due to a gradual economic recovery and lower cost of borrowing.
This, the report says, was noted due to growth in personal and household loans at 7.8 percent.
Agricultural loans increased to 5.1 percent while the manufacturing sector increased by 10.7 percent.
However, lending to trade contracted 1.6% while lending to service sectors, including education and hospitality, remained low due to Covid-19.
During the period, however, the Central Bank noted a worsening deterioration in loan quality, posing a serious risk to the stability of the financial sector.
The report noted an increase in write-offs resulting from bad debts, which rose 46.9% to Shs242.6b.
The ratio of non-performing loans fell from 4.9% to 6.3%, slowed by credit relief measures, which created a buffer for troubled financial institutions.
The Central Bank implemented a number of measures in supervised financial institutions in April, responsible for easing the terms of loans to customers facing difficulties.
Between April and December 2020, borrowers requested cumulative total credit relief of 7.9 trillion shillings, of which 7.7 trillion shillings was granted by banking institutions, resulting in an acceptance rate of 97. 6%.
At least 44.6% of gross loans in the banking sector, according to the Bank of Uganda, have benefited from credit relief measures since April 2020.