Interest rates 'too high' on loans in Uganda

Dec 21, 2011

Interest rates on existing and running loans in Uganda are too high, the Kampala City Traders Association (Kacita) has claimed.

Interest rates on existing and running loans in Uganda are too high, the Kampala City Traders Association (Kacita) has claimed.

The organisation believes these are undercutting financial growth in the country, as well as leading more borrowers to default on their loans and prevent access to finance, the Monitor reports.

Chairman of Kacita Everest Kayondo explained the problem lies with increasing interest rates on loans that have already been taken out, rather than rates on new loans.

This is due to the fact consumers have fixed incomes and cannot afford the higher charges.

The changes were introduced after the Bank of Uganda increased the central bank rate (CBR) from 16 percent to 20 percent back in September, leading many commercial banks to follow suit.

In November, the organisation then increased the CBR further to 23 percent, which is a growth of 300 basis points.

Mr Kayondo said: "The end result shall be delinquency which shall result in bad loans with a resultant loss of collateral for the borrowing public."ADNFCR-2976-ID-801246333-ADNFCR