President Yoweri Museveni shakes hands with Vice President Edward Sekandi as he arrived at serena Conference Centre to deliver the State of the Nation Address.photo credit/watchdog.co.ug

President Yoweri Museveni has castigated private commercial banks, saying they encourage the importation of goods, a development that costs the country billions of dollars annually.

Speaking during the State of the Nation Address (SONA) at the Serena International Conference Centre yesterday, Mr Museveni his strategy of involving the private commercial banks in a bid to lower interest rates in Uganda had not been successful. Currently, commercial banks lend at 23.5 per cent, despite the inflation rate being at 5 per cent, he noted.

‘I wanted to see whether the involvement of the private sector in Banks, would lower the interest rates because of “competition” and the “efficiency” of private actors.  Well, the facts show that it has not.  Even when the inflation rate is 5%, the Banks lend at 23.5% as of now.  It is these Commercial Banks that are fuelling the craze of importing by giving endless loans to importers (abagula)’, he noted, adding however, that  the manufacturers and sellers had been left out of the lending loop by the commercial banks.

Stories Continues after ad

‘Twenty two per cent (22%) of their lending is to importing.  Should we say that the commercial banks are part of the haemorrhage?  Fortunately, we have the option of UDB that will come to our rescue’, Mr Museveni said, and added that that is why the government never privatized the Uganda Development Bank in the first place.

‘Again, on the issue of financing, the NRM had the foresight to leave UDB out of the privatization,’ he said and emphasized that the bank would be further capitalized.

The President also weighed in on the issue of banks attaching properties of those who had supplied government on credit, saying he had directed the matter be resolved.

‘There is the problem of Government not paying arrears of private companies that supplied to Government.  I have already directed Government to resolve this issue.  In any case, the Banks should not use this excuse to grab people’s properties as long as there is evidence that those companies are owed money by the Government,’ Mr Museveni said.

He added: ‘Some of the Commercial Banks and money lenders, apparently use unethical methods to steal the property of Ugandans. I have, for instance, heard of money-lenders presenting money-lending as a sale and using any default by the borrower to grab people’s properties’.

Mr Museveni also assured Ugandans that the Government is going to initiate legislation to deal with consumer protection.

‘Ugandan companies should also be more careful in dealing with these Banks because some of them use their ignorance.  The Government is now fully aware and will take all the legal and appropriate counter-measures.  Islamic Banking, which we have legalized, will also bring in a new philosophy to the chagrin of these sharks,’ he stressed.