Customers in banking hall

All credit institutions remained adequately capitalized as at end of June 2019 and held strong liquidity buffers. The sub-sector registered significant growth in total assets from Shs624.5 billion as at end June 2018 to Shs963 billion as at end June 2019, says the Bank of Uganda (BOU) in its Financial Stability Report for June 2019.

The report attributes the increase to a new entrant in the subsector.

Net loans and advances for the sub-sector, according to the report,  increased from Shs.337.7 billion to Shs596.4 billion over the period under review, while total deposits rose from Shs437.8 billion to Shs.463.1 billion.

Capital Adequacy

As at end June 2019, the credit institutions sub-sector’s core and total capital adequacy ratios stood at 21.9 percent and 23.5 percent respectively, an improvement compared to 20.9 percent and 22.5 percent as at end June 2018.

Asset Quality

The sub-sector’s Non-Performing Loans (NPL) ratio stood at 4.2 percent as at end June 2019, up from 4.1 percent in the previous year. Non-performing loans in the sub-sector increased from Shs13.7 billion as at end June 2018 to Shs25.6 billion as at end June 2019, largely due to one institution, whose asset quality deteriorated, accounting for 85.3 percent of the sub-sector’s total non-performing loans.


On aggregate, Credit institutions registered a net profit of Shs7.5 billion in the year to June 2019. The cost-to-income ratio remained high and was in part attributed to high costs of deposits. Interest income was the main source of income for credit institutions, rising to 83.6 percent of total income during the second quarter of the year 2019.


The Credit Institutions’ aggregate ratio of liquid assets to total deposits stood at 52.9 percent as at end June 2019, well above the minimum prudential requirement of 20.0 percent. Liquid assets increased from Shs208.7 billion to Shs244.7 billion in the year to June 2019. The sub-sectors total loans to deposits ratio was 126.3 percent mainly due to one institution which had a high ratio, as its loans were largely financed by borrowings.

MDIs see total assets grow to 642.3 billion

All five licensed Microfinance Deposit-taking institutions (MDIs) remained adequately capitalized in the year to June 2019. Total assets held by MDIs increased to Shs642.3 billion from Shs.562.2 billion largely due to growth in gross loans by Shs55.2 billion and fixed assets by Shs.14.9 billion.

Capital Adequacy

On aggregate, the sub-sector’s core and total capital to risk-weighted assets ratios stood at 41.8 percent and 45.0 percent, compared to 44.4 percent and 48.0 percent as at end June 2018, respectively. Both ratios were above the statutory minimum requirements of 15 percent and 20 percent, respectively.

Asset Quality

The MDIs portfolio-at-risk ratio improved to 3.9 percent from 4.4 percent due to an increase in gross loans by Shs55.2 billion. The ratio of provisions to non-performing loans stood at 88.3 percent, indicating adequate provisions to cover potential credit losses.


Aggregate net profit after-tax was up by Shs1.7 billion and amounted to Shs9.1 billion as at end June 2019. This was due to a more than proportionate increase in total income of Shs10.0 billion, compared to an increase in total expenses of Shs8.1 billion. Four of the five licenced MDIs were profitable during the period under review.


All MDIs maintained liquid asset ratios in excess of the statutory minimum requirement of 15 percent of total deposit liabilities. Total liquid assets held increased by Shs7.4 billion to Shs.156.3 billion largely due to an increase in investment in government securities. However, the liquid assets-to-deposits ratio declined to 63.4 percent as at June 2019 compared to 68.9 percent as at end June 2018 while the ratio of total loans to total deposits stood at 77.4 percent, below the 85 percent prudential limit.

The Retirement Benefits Sector

The sector comprises 63 licensed retirement benefits schemes with a total of Shs 13.0 trillion assets under management (AUM) as at end June 2019. Assets in the retirement benefits sector rose by 4.1 percent over the past four quarters to June 2019. The sector posted a 1 year median return of -11.8 percent, 15.6 percent and 9.8 percent compared to -8.8 percent, 10.9 percent and 9.6 percent for quoted equities, fixed income and money markets respectively.

Systemic market assessment

Asset allocation for retirement benefits schemes continues to depict a heavy bias towards fixed income securities with government securities accounting for 74.6 percent.

Investments in quoted securities are the second largest accounting for 13.5 percent of the total sector investment. The performance of equities largely mirrored that of the Kenyan stock market due to the large proportion (70 percent) of quoted equities held in Kenya.

The insurance sector

The insurance industry registered 9.1 percent growth in total assets at the end of June 2019. Similarly, total industry gross written premiums (GWP) increased by 12.2 percent to Shs.495 billion in June 2019, from Shs.442 billion in June 2018.

Non-life GWP increased by 8.4 percent Shs USh.310 billion to sHS336 billion while life GWP increased by 24.7 percent from Shs99 billion to Shs124 billion during the same reference period.

In addition, health maintenance organization (HMO) GWP increased by 9.0 percent from Shs28.5 billion to Shs35.6 billion while specialist Micro insurer GWP amounted to USh.29 million in June 2019.

Between June 2018 and June 2019, the industry’s net incurred claims increased by 5 percent, from Shs131.2 billion to Shs137.7 billion. This was attributed to a rise in the non-life net incurred claims and HMO which rose by 17.2 percent and 27.6 percent over the same period. On the other hand, the life net incurred claims declined by 22.2 percent from Shs46.4 billion to Shs36 billion.

According to the report, management expenses for the sector stood at Shs121.2 billion, with the specialist micro insurer accounting for the largest proportion of these expenses.