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BOU asked to act tough on loan-land transactions

By Andante Okanya

Added 18th April 2019 02:14 PM

The commission has noted that some commercial banks do not conduct due diligence, and accept contentious land titles as collateral to access loans.

BOU  asked to act tough on loan-land transactions

Bank of Uganda legal counsel Margret Kaggwa (right) with legal officer, Lorna Gario at the land probe inquiry on Wednesday. Kaggwa appeared at the commission on behalf of the central bank on the interface between banks and land transactions. (Photo by Denis Dibele)

The commission has noted that some commercial banks do not conduct due diligence, and accept contentious land titles as collateral to access loans.

LAND PROBE

The land probe commission has tasked Bank of Uganda(BOU) to toughen on loan-land transactions conducted by commercial banks, saying fake titles are blocking economic development.

The commission gave the proposal  when BOU legal counsel Margaret Kaggwa, made a presentation at the probe public hearing in Kampala on Wednesday.

The commission has noted that some commercial banks do not conduct due diligence, and accept contentious land titles as collateral to access loans.

Probe chairperson Justice Catherine Bamugemereire, emphasised that these non-performing loans, have clogged the financial system. She said authentication of land titles should be adhered to.

  and probe commission deputy lead counsel ohn osco uuza right interacts with ank of ganda legal counsel argret aggwa at the land probe inquiry on ednesday hoto by enis ibele Land probe commission deputy lead counsel John Bosco Suuza (right) interacts with Bank of Uganda legal counsel Margret Kaggwa at the land probe inquiry on Wednesday. (Photo by Denis Dibele)

 

"Bad loans are in the system because a bank manager turned a blind eye and failed to see that the land is in a swamp.

Probe commissioner,  Dr Rose Nakayi, observed that some banks had been used and were being used as conduits to peddle and sanitise fake titles. She said some unscrupulous people had mortgaged swamps.

Kaggwa responded that BOU expects commercial banks to conduct stricter credit flow measures.

"Bank of Uganda's role is to ensure that if land is taken as security, then it must be enforceable. This means that it should have been obtained legally, not through fraud," Kaggwa explained.

"It is not possible for Bank of Uganda to micromanage the security risk assessment of commercial banks. It is the duty of banks to ensure people do not mortgage titles which are bad." 

Prior, deputy lead counsel John Bosco Suuza, explained why the commission wanted to hear the view of stakeholder entities.

Suuza said the commission wanted to have a comprehensive understanding of the interface between the banking sector and the land sector.

The deputy lead counsel noted that there is a general public perception that the central bank has not assisted borrowers on advisory.

Suuza also observed that there was a persistent unfairness, where commercial banks have rejected loan applications of those who submit customary certificate of title as security.

Kaggwa responded that commercial banks are duty-bound to weigh the danger associated with the collateral, and whether it is worth the gamble.

"Commercial banks assess the credit risk and manage it. If the commercial bank finds that the collateral is not worth it, they won't accept it," explained Kaggwa.

"A loan is not advanced against a security. It is advanced on the basis of stream of income. Security is just in case you fail to make payment. When you present security, it must be strong enough."

Kaggwa stressed that it is incumbent upon commercial banks to ensure assigned property valuers report accurately to avoid embarrassment of distortions..

Commission fact file

On December 8, 2016, President Yoweri Museveni appointed a seven-member commission of inquiry chaired by Court of Appeal Justice Catherine Bamugemereire, to inquire into land matters.

This was prompted by several documented instances of public outcry.

The team took oath on February 19, 2017, with mandate to inquire into the effectiveness of law, policies and processes of land acquisition, land administration, land management and land registration. 

Subsequently, public hearings commenced on May 9, 2017 at National Archives and Records Centre in the city suburb of Nakasero.

On November 10, 2017, the President extended the probe's mandate for  six months. Last year on May 4, 2018, Museveni endorsed an 18-month extension of the probe.

The probe commissioners are Frederick Ruhindi, Dr Rose Nakayi, Mary Ochan, Robert Ssebunnya, Joyce Habaasa, and George Bagonza

Deputy lead counsel is John Bosco Suuza, while Andrew Odiit is assistant lead counsel.

Dr Douglas Singiza is commission secretary, while Daniel Rutiba is deputy secretary.

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