Corporate clients biggest loan defaulters
Oct 18, 2010
CORPORATE clients constitute the bulk of bank loan defaulters in Uganda, a bank official has revealed.
By Alex Balimwikungu
CORPORATE clients constitute the bulk of bank loan defaulters in Uganda, a bank official has revealed.
“Corporate clients are the biggest loan defaulters compared to micro clients. Their defaulting rate and bounced cheque offences continue to rise.
This has hampered cash flows of some commercial banks,†Rashid Musisi, the corporate branch manager of Centenary Bank said last week.
Musisi was presenting a paper on “improving corporate loan portfolio quality in Uganda,†at the 6th annual international operations research society of East Africa conference at Hotel Africana in Kampala.
He noted that the problem was growing and had already caused some banks to lose over 30% of their income in written off bad debts.
He pointed out that lending was the principal business activity for most commercial banks and loan portfolio was the largest asset and predominant source of revenue.
“Loan portfolio is one of the greatest sources of risk to a bank’s soundness. Whether due to lax credit standards, poor portfolio risk management or weaknesses in the economy, loan portfolio problems have been the major cause of bank failures,†Musisi said.
He advised banks to implement loan portfolio management, a process by which risks that are inherent in the credit process are managed and controlleds.
“Assessing loan portfolio management involves evaluating the steps a bank’s management takes to identify and control risk throughout the credit process,†Musisi said.
Between 1996 and 2005, five banks in Uganda closed due to poor portfolio quality, while several others were recapitalised or taken over.
CORPORATE clients constitute the bulk of bank loan defaulters in Uganda, a bank official has revealed.
“Corporate clients are the biggest loan defaulters compared to micro clients. Their defaulting rate and bounced cheque offences continue to rise.
This has hampered cash flows of some commercial banks,†Rashid Musisi, the corporate branch manager of Centenary Bank said last week.
Musisi was presenting a paper on “improving corporate loan portfolio quality in Uganda,†at the 6th annual international operations research society of East Africa conference at Hotel Africana in Kampala.
He noted that the problem was growing and had already caused some banks to lose over 30% of their income in written off bad debts.
He pointed out that lending was the principal business activity for most commercial banks and loan portfolio was the largest asset and predominant source of revenue.
“Loan portfolio is one of the greatest sources of risk to a bank’s soundness. Whether due to lax credit standards, poor portfolio risk management or weaknesses in the economy, loan portfolio problems have been the major cause of bank failures,†Musisi said.
He advised banks to implement loan portfolio management, a process by which risks that are inherent in the credit process are managed and controlleds.
“Assessing loan portfolio management involves evaluating the steps a bank’s management takes to identify and control risk throughout the credit process,†Musisi said.
Between 1996 and 2005, five banks in Uganda closed due to poor portfolio quality, while several others were recapitalised or taken over.