By Julius Businge
The Kampala City Traders Association is calling for further reductions in interest rates by commercial banks to enable them access cheap credit to run business.
In an interview with The Independent Everest Kayondo, the association’s chairman said commercial banks were quick at raising interest rates when the central bank hiked its policy interest rates but were not willing to cut rates when the central bank reduced the CBR.
According to the Bank of Uganda commercial banks’ weighted average rates jumped from 21.7% in July 2011to 26.9% in July 2012. The jump was fueled by the hike in the CBR which touched 23%. The CBR was introduced in July last year as a monetary policy tool under inflation targeting to fight inflation which hit a 30.4% mark, the highest since 1993.
Bank of Uganda announced on Sept. 4 a cut in the CBR to 15% from 17% in September and August respectively. The reduction came shortly after the Uganda Bureau of Statistics reported that annual headline and core inflation fell sharply to 11.9% and 11.5% respectively in August from 14.3% and 15.4% in July.
Early this year Kampala traders went on a three day strike protesting the high interest rates which they said were pushing them out of business.
Kayondo said they are not contented with the rates charged by the banks and have developed the concept paper to start their own bank.
“We hope to start it in the first quarter of 2013,” he said.