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2016: Bankers divided on impact of miserable year

Emmanuel Tumusiime-Mutebile

Recovery starts?

In the end, it appears, it does not matter who is right or wrong on some of these issues and many banking sector managers are looking ahead instead.

That is the attitude of Clever Serumaga, the business development manager for Bank of Africa (BoA).  He describes the year (2016) as a year of recovery from the negative after-effects of 2011-2013 bad performance.

Serumaga said BOA had at some point in 2011/2013 recorded 17%, the highest in the bank’s history as NPLs for their loan book but moved quickly with new credit approaches which brought the number to 2.3% in 2016.

Similar to Serumaga, bankers that spoke to The Independent said they are implementing internal credit management systems by undertaking capacity building on loan processing and management by staff and borrowers and following closely sectors that banks’ clients are involved in and advising them on loan repayment mechanisms.

The bankers said the financial institutions are also ensuring that borrowed funds are not diverted to other speculative sectors that yield business loses and affect loan repayments.

Serumaga said many of their clients always want quick wins and end up diverting borrowed funds to speculative
sectors like real estate, general trading with neighboring countries like South Sudan and offering services to government that has in the end made them unable to clear their loans as a result of hard economic environment.


“We have sensitisation workshops for most of our customers aimed at equipping them with knowledge to overcome these shocks,” he said, “And that is why we have concentrated our lending to viable sectors like manufacturing, construction, and government securities.”

Also many banks invested heavily in digital platforms during the year to migrate high volume but low value transactions from the branches onto their digital platforms.

They also embraced mobile money and added several payments to it so as not to lose out to mobile telephone companies inventing in new payment systems.

Mutebile’s advice to banks  in 2017

Mutebile too says the latest central bank data indicates that the sector could have passed the peak of NPLs in the banking system although value of NPLs fell by 6% between July and September. Mutebile said this is because of new credit approaches bankers are putting in place.

But, Mutebile told bankers, although there were signs of reducing NPLs in the market it is still too early to be very confident that NPLs were really on a downward trend.

He said that over the 12 months to September 2016, the value of loan applications rose, albeit at a relatively modest 7% compared to the previous 12 months, whereas the value of loans actually approved by banks fell marginally by 2%.

Players say that the main constraint to loan growth has been on the supply side of the credit market rather than on the demand side, with banks turning down loan applications because of concerns
about borrower creditworthiness or the realizable value of loan collateral, given the saturated state of the property market.

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