Banking remains attractive with Finance Trust as latest entrant

By David Mugabe

The banking industry remains lucrative attracting more new players, with Finance Trust Bank being the latest entrant, having transitioned from a microfinance deposit institution to a fully-fledged commercial bank.

The Central Bank granted Finance Trust a commercial banking license on November 11, 2013. There are now about 25 banks with four dominant ones controlling almost 50% of the total industry’s balance sheet. But still, only about 30% of the population is in formal banking.

The sector, according to analysts, also remains hugely attractive because the lending rates in Uganda are some of the highest in East Africa, which brings good spin-offs to the institutions.

The bank’s management believes there still exists good business because of the existing landscape.

“Most banks are in urban areas, which gives us the opportunity to go for rural women,’ said Irene Muloni, the chairperson of Finance Trust Bank, who is also the energy minister.

Finance Trust, which started operations in the early 1980s, will maintain its lending rates between 27%-30%.

The bank’s ambition of becoming a fully-fledged commercial bank was pegged back when the Central Bank raised the capital base requirements of banks from sh4b to sh25b. Muloni said they then sought international funders to raise the capital base.

It has taken them about three years to get a license, although the bank’s ownership remains largely local.

The microfinance model is deemed more risky because majority of the borrowers are from the rural areas

The bank’s managing director, Anne Mulindwa, says they are now testing mobile banking to avoid tying people to banking halls, and also the idea is to bring down costs using technology.

The bank currently has 230,000 customers, of which there are 25,000 borrowers with different loan portfolios. The deposit base is sh43b, with sh58b loan portfolio and an asset base of sh91b.

Women are at the core of their clientele, with products that start the girl child at 10 years according to Mulindwa.

On the stock exchange on Tuesday, turnover moved to sh9.1m, with Stanbic selling 168,061 shares and fetching sh5m in turnover.

The banks closed the session at sh30 per share. There were outstanding bids for 28.8 million Stanbic shares. Umeme and Uganda Clays were the two other active counters, posting sh3.9m and 176,200 in turnover respectively at an average price of sh365 and sh30.