Uganda: Credit to private sector picks up after fall in lending rates
New figures from the Bank of Uganda (BOU) reveal that the average bank lending rates for shilling denominated loans fell to 20.8 per cent in February 2014, the lowest since mid-2011.New figures from the Bank of Uganda (BOU) reveal that the average bank lending rates for shilling denominated loans fell to 20.8 per cent in February 2014, the lowest since mid-2011.
As a result, growth of credit to the private sector picked up slightly in February 2014, registering a year-on-year growth of 6.8 percent, East African Business Week reports.
However, the ratio of Non-Performing Loans (NPLs) has increased to 6.9 percent, and shilling denominated loans in February 2014 stood at Ush29.9 billion (just over $11.6 million) compared to Ush60.2 billion in January 2014.
The Central Bank is thus warning a faster recovery in credit growth may be impeded as banks focus on improving credit quality.
Uganda saw a sharp slowdown in 2012 because of world economic troubles and the government's tight fiscal and monetary policies. Commercial lending rates were as high as 27.6 percent for shilling-denominated loans.
While helping to stabilise the economy, with inflation dropping from 25.7 percent to 5.5 percent between January and December 2012, these policies held back the economy, according to African Economic Outlook.