Afriland First Bank has become undercapitalised after reporting a combined net loss of sh4.5b over the last two years. 

In the last twelve months to December 2021, the bank reported a net loss of sh2.6b, up compared to a net loss of sh1.8b reported in 2020.  

The Bank of Uganda granted the lender a license to operate a commercial bank in 2019. The bank is part of Afriland First Group founded in Switzerland in 2008, with networks spread in about 13 African countries.   

The audited financial records for the bank as at end of December 31, 2021, show that the bank’s capital has been eaten into by the losses posted over its short period in operation. 

The bank’s capital fell to sh19b in 2021 from sh26b in 2020. Under the Financial Institutions Regulations 2018, all commercial banks are required to maintain a minimum capital of at least sh25b. 

This means that Afriland Bank was undercapitalised to the tune of sh5.9b during the period under review.  

Grant Thornton, the auditors of the bank’s financial health noted that the conditions indicate the existence of uncertainty about the bank’s ability to continue as a going concern—an accounting term that expresses doubt over the financial stability of an entity. 

“The continuation of the bank is dependent on continued financial support from shareholders and other remedial actions by the bank,” the auditors said. 

“The Bank of Uganda directed the management of the bank to submit capital restoration plan. The implementation of the submitted capital restoration plan is ongoing in accordance with the requirements of Financial Institutions Act 2004. As at December 2021, the bank received sh6.3b share application money from the existing shareholders of the bank and the same will be issued to the shareholders in due course.”  

During the period under review, the bank’s total assets declined to sh33b from sh34b in 2020. Customer deposits declined by 87% to sh176m from sh1.3b.