The Bank of Uganda Governor Emmanuel Tumusiime Mutebile has said it is not mandatory for a foreign bank to establish a representative office in Uganda in order to conduct lending or non-deposit activity.
The assertion by Mr. Mutebile means that Judge Henry Peter Adonyo’s recent ruling stating that it was illegal for Diamond Trust Bank Kenya in partnership with Diamond Trust Bank Uganda to lend money to Ham Enterprises in form a syndicated loan is legal.
“Foreign banks’s lending deposits held in jurisdictions other than Uganda are regulated and supervised by their home authorities. It is not mandatory for a foreign bank to establish a representative office in Uganda in order to conduct lending or non-deposit activity,” said Mutebile on Wednesday in a press statement.
Diamond Trust Bank Kenya and Diamond Trust Bank Uganda loaned over Shs39.7 billion for Ham Enterprises but has defaulted on paying back the loans. Kiggundu acquired the loans in four tranches; US$6.2 million, US3.2 million, US$458, 604 and Shs2.8 billion from Diamond Trust Bank Uganda and Diamond Trust Bank Kenya. The loans were consolidated later over two years ago and were to run from five years, ending August 23, 2023. Instead Kiggundu turned around to sue Diamond Trust Bank Uganda for fraud, alleging that the bank has been deducting his money from his bank accounts to the tune of Shs120 billion.
Court yesterday issued an interim order to stay the execution a decree in the main case where Kiggundu alleges that Diamond Trust Bank Uganda conned him of Shs120 billion, the decree now awaits pending the determination of the main case.
The Principal Judge, Justice Dr. Flavian Zeija delivered the interim order in the presence of M/S K & K Advocates, the lawyers for Diamond Trust Bank Uganda and Diamond Trust Bank Kenya, even though Kiggundu’s lawyers didn’t attend the reading of the interim order, much as they were served.
Tumusiime-Mutebile’s statement has been welcomed by members of the Uganda Bankers’ Association (UBA) who had also castigated Judge Adonyo’s against Diamond Trust Bank Uganda and Diamond Trust Bank Uganda. UBA days ago published a statement that commercial banks in Uganda already have issued about Shs5.7 trillion as syndicated loans and that the money would be affected by the ruling that seemed to support Kiggundu to default on his loan payment obligation.
“We commend Bank of Uganda for coming out to clarify on the issue of syndicated loans in Uganda,” a member of UBA said, adding that commercial banks in the country play a big role in funding even government projects.
Several agencies, government and the private sector say the ruling if upheld could damage Uganda’s drive to become an investment destination, as it would block capital inflows.