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Bank loan requests grow as approvals decline in first three months of 2023

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Simon Kabayo
Simon Kabayohttps://eagle.co.ug
Reporter whose work is detailed

Over one million people applied for loans in different financial institutions across the country in the last three months, a report by the Bank of Uganda indicates.

However, the approval rate also declined, amid fears of default due to sluggish economic performance, the State of the Economy Report for April 2023 released on Thursday, 11 May 2023, indicates.

According to the report, the approval rate for credit declined in the three months to March 2023 to 60.44 percent from 63.59 percent in the three months to December 2022 in value terms, on the back of approvals to multinational borrowers

“Notably, there was an increase in the number of loan requests to 1.09 million applicants in the three months to March 2023 from 0.97 million in the three months to December 2022,” the report states.

This came as growth in private sector credit remained sluggish across major sectors, except for the personal loans and manufacturing. The agriculture sector also recorded contractions in credit since November 2022 while Building, Mortgage, Construction and business services sectors experienced major credit growth slowdown.

According to the report, total private sector credit growth moderated to 9.8 percent in the three months to March 2023 from 10.2 percent in the three months to December 2022 driven down by declining lending in foreign currency.

“The moderation of credit growth reflects the increasing lending rates which somewhat negatively affected credit demand and valuation changes at the back of the shilling appreciation. Nonetheless, at 8.7 percent, private sector credit growth net of valuation and capitalized interest was relatively stable in the period but below historical trends,” the report states.

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