The Bank of Uganda-BoU Deputy Governor, Michael Atingi-Ego has criticized tycoon Patrick Bitature for failing to pay his loan he acquired from South African lenders Vantage Capital.
Atingi-Ego, was among those who spoke during the plenary session that was held on Thursday afternoon at Serena Conference Center. He used his time to pronounce himself on many things including some of the things that make lending to Ugandan businesses such a risky venture.
The panel discussed proposals contained in a huge report authored by the National Planning Authority (NPA) in order to find ways to bring down the cost of borrowing or accessing credit for Ugandan private businesses.
The day’s theme (Reducing the Cost of Credit in Uganda: A case of Public Investment in Banking) made reflection on the Bitature saga very appropriate.
The embattled tycoon finds himself in bad publicity for defaulting on his loan of $10m attained from the South African based lenders, which has since accrued to $34m in a seven-and-a-half-year period.
The BoU boss made veiled reference to the decision by Bitature‘s lawyers to keep running to court to keep evading repayment responsibility instead of duly advising their client to pay up.
The Central Bank chief said mere increasing capital and market share for the government-owned banks (as contained in the NPA proposals) won’t be enough to make credit cheaper in Uganda because there are many other factors complicating the lending business in Uganda.
He gave the example of so-called business tycoons (he didn’t mention any specifically) who don’t have the willingness to act honestly and pay back when the loan is due even when they have the money. He castigated them for obstinately running to court to seek temporary protection against foreclosure (of the mortgaged properties or assets) even when they well know that loan repayment is due.
He said this explains why collateral (loan security) worth over Shs7trn continues to be tied up in endless commercial disputes in the Commercial Division of the High Court mostly between banks and defaulting borrowers.
He challenged the Judiciary to rise to the occasion and be alert about such defaulting tycoons who dubiously seek refuge in courts of law instead of paying up the money previously borrowed. He saluted the Justice Ministry for working closely with the Finance Ministry to accelerate the recruitment of more High Court judges to expedite the hearing and disposal of such commercial disputes.
The Central Bank boss’ views were to later be amplified by Wilbroad Owor, the Executive Director for Uganda Banker’s Association (UBA), which brings together 25 commercial banks and one development bank (UDB).
Owor said the Judicial officers had better become serious by keenly beginning to crack the whip on such defaulting businessmen and borrowers because their mal-conduct and elusiveness when it comes to paying back borrowed money was seriously threatening Uganda’s reputation and suitability as an investment destination attractive to those involved in the lending business
Patrick Bitature isn’t the first Ugandan businessman to hide behind legal technicalities to justify non-repayment of borrowed money in billions. Hammis Kiggundu, equally represented by Fred Muwema had previously tried to circumvent paying back hundreds of billions borrowed from Diamond Trust Bank on grounds their Kenyan operation, from which he borrowed some of the money, wasn’t licensed to conduct the lending business in the Ugandan market.
Atingi-Ego asserted that such conduct by lawyers, defaulting borrowers and their accomplices in the Judiciary was partly to blame as to why commercial banks are increasingly considering lending to the Ugandan private sector risky which accounts for prohibitions like high interest rates.