Uganda’s central bank may cap commercial bank interest rates

KAMPALA (Reuters) – Uganda’s central Bank (BoU) has threatened to cap the interest that commercial banks can charge borrowers, after the industry failed to reduce loan rates in response to cuts in benchmark rates, according to a letter from its governor.

The BoU cut its Central Bank Rate by 200 basis points to an all-time low of 7% between April and June, to try to help jumpstart an economy battered by the impact of the coronavirus.

Its governor Emmanuel Tumusiime-Mutebile said in the letter, – dated July 7, sent to all commercial banks and seen by Reuters – that he was “disheartened” to see they had not acknowledged that reduction with cuts of their own.

The central bank was therefore considering invoking a law that allows it to determine maximum and minimum rates that “financial institutions may…impose on credit extended in any form.”

Neighbouring Kenya capped lending rates for its commercial banks on similar grounds in 2016, but scrapped the policy last November after it was blamed for stalling lending to businesses.

Tumusiime-Mutebile said in the letter that weighted average lending rate on loans rose to 18.8% in May from 17.7% in April, at a time when economic activity in Uganda was facing an unprecedented decline due lower demand, lower capital inflows, reduced productivity and mass unemployment

If implemented, the cap would significantly hit revenues at commercial banks, whose leading local players include affiliates of Standard Chartered Bank and South Africa’s Standard Bank.

The World Bank projects growth in Uganda’s economy could slow 0.4% this year from 5.6% in 2019 due to the effects of the pandemic.

Partner Content

Mauritius-Africa, a partnership for shared prosperity

By: Mathieu Mandeng In the current complex and challenging circumstances that are testing the...


The City of eThekwini pulled out all stops to give fans of the annual Vodacom Durban July (VDJ). The Virtual Vodacom Durban...

GAUTRAIN – Why It Matters

Economic growth continues to be one of the focus areas for the Gauteng Provincial Government (GPG) and the Gautrain responds to that...

Tata International concludes a securitization transaction for its African Subsidiaries

UAE financial centers act as a gateway to benefit African businesses GCC, July 13th, 2020: Tata International Limited (TIL)...

Trending Now

Tech giants report strong earnings

The big four tech giants, worth nearly $5 trillion reported earnings last week defying the worst economic downturns on record. Joining CNBC Africa for more on the numbers is Henry Biddlecombe, Analyst at Anchor Capital.

Human trial for COVID-19 vaccine launched by Johnson & Johnson

Johnson & Johnson has confirmed that a human trial for a COVID-19 vaccine has begun in the United States and Belgium after positive results were seen in its study with monkeys.

SAVE CEO on the benefits of open banking amid COVID-19

COVID-19 has in a way increased the uptake of open banking solutions and with many consumers starting to use mediums such as services provided by fintechs, could this affect your banking choices, CNBC Africa spoke to the CEO and Founder of SAVE, Shema Steve for more.

Kenya’s domestic borrowings up in July amid COVID-19 response

Almost record monthly figures in regards to the Kenyan government borrowing marked the first month of the new fiscal year collecting over $2 billion through bills and Treasury bonds, but what does this mean if anything for the fiscal direction of Kenya, Callstreet Research Director, George Bodo spoke to CNBC Africa for more.

Subscribe to our newsletter

Sign up for free newsletters and get more CNBC AFRICA delivered to your inbox

- Advertisement -