The household and personal loans have dominated the largest share of credit in the private sector in Uganda as financial institutions continue to shy away from others due to risks involved.
According to the Performance of the Economy Report for April 2024, of the total credit extended to the private sector in March 2024, personal and household loans accounted for the largest share at 32.9% followed by business, community, and social services (22.3%), trade (16.6%), and agriculture (10.0%), among other sectors.
This is similar to February 2024 when personal and household loans accounted for the biggest share at 37.1% followed by Business, community, and social services (16.6%), Trade (16.2%) and agriculture (13.5%) among others.
In March, the value of credit approved for disbursement increased by 10.6% to Shs1.096.1 trillion from Shs991.2 billion in February 2024.
“This was mainly attributed to increased demand for credit by prime borrowers who are considered less risky. Commercial banks were therefore more willing to advance credit to these borrowers,” the report states.
Nevertheless, the weighted average lending rates for Shilling-denominated credit reduced to 17.34% in March 2024 from 18.09% in February 2024.
This was partly due to more lending towards prime corporate borrowers, whom banks charge lower interest rates as they are deemed less risky.
However, lending rates for foreign currency-denominated credit increased to 9.2% in March 2024 from 8.8% in February 2024, mainly on account of depreciation pressures on the exchange rates in the previous months.
