Uganda bankers to discuss state of banking

By John Odyek

"We need to bring the costs down without increasing the risks. When costs of running banks go up with revenue going up, it is not good business."

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PIC:From left,Arinda(speaking),Mbuga,Muheire,Owor and Patricia Amito addressing the media at the Uganda Bankers Association offices in Muyenga.(Credit: John Odyek)


KAMPALA - Bankers in Uganda will be discussing the state of banking focusing on the emergence of new technologies and how to serve customers better.

Patrick Muheire, chairman Uganda Bankers Association (UBA) told the media they would discuss how to keep the banking sector relevant to the economy on Tuesday.

“We will discuss how to do business in the right way without puting anyone at risk,” Muheire said.

He was addressing the media as the annual bankers conference opens today at the Kampala Serena Hotel.

He noted that 15% tax imposed on money transfer or withdrawal services, the 1% levy has also been slapped on mobile money transactions might roll back the gains Uganda has made in the financial sector.

“We are sympathetic with the cause for tax collection but method of collection needs to be looked at. A few people are being overtaxed,” Muheire said.

Muheire who doubles as the chief executive officer of Stanbic Bank called for more businesses in the informal sector to be brought to the formal sector.

He said the 200 small and medium size businesses in Uganda should be supported to enable them create jobs, produce goods and services and contribute to tax revenues.

Out of 24 commercial banks licensed in Uganda, 12 are said not to be doing very well while six are making losses.

“There are six to seven commercial banks making losses. The cost of doing business is high and there is a lot of inefficiency in the sector.

"We need to bring the costs down without increasing the risks. When costs of running banks go up with revenue going up, it is not good business."

Despite the high interest rates on lending, the 12% return on equity and profitability for commercial banks in Uganda, according to Muheire, was low.

He called for increase in the speed of regulation by Bank of Uganda to meet the speed of innovation. “The regulations are not moving as fast as the innovation."

Wilbrod Owor, executive director UBA, said banks and telecom companies were partners citing that mobile money agents keep their accounts known as a float in the banks.

“All mobile money transactions are mirrored in banks. There are more people holding mobile money accounts than bank accounts."

Owor said 966 agent banks have been set up in Uganda. He added that telecom companies have over 11,000 agents which qualify to function as agent banks. He said banks were waiting for regulations that would allow the telecom agents to serve as agents for commercial banks.

He said the commercial bank lending to the private sector had increased from 2% to 7% of the GDP recently but it was low, adding that the appropriate level would be 14% of GDP but there were many challenges affecting lending to the private sector.

Paul Mbuga, the CEO of Eclectics International, said the provision financial services can reach more people using technology 24 hours a day.

The conference theme is: ‘Financial Sector Stability: Managing Risk in a Growing and Fast Changing Environment’

It will dwell on matters affecting the performance and stability of the banking industry at the global, regional and domestic level.

These include challenges faced by banks including credit risk, Government fiscal, monetary policy frameworks and other issues required to facilitate financial sector stability, investor confidence as well expectations from the wider spectrum of stakeholders on how the banks should drive growth across the economy.