Uganda’s popular young tycoon Hamis Kiggundu, the CEO of Ham enterprises has proposed sweeping changes in the nation’s banking system that would permit commercial banks give waivers to businessmen and also protect budding entrepreneurs.
In a petition copied to the legislature, executive and relevant stakeholders, Hamis commonly known as Ham said 95% of Banks in Uganda are foreign Banks under foreign ownership and directorship.
“The foreign Banks are equally discriminative when giving interest rates on loans where foreigners receive lower interest rates i.e. like 16% on Ugx loans while Ugandans receive interests in the range of 23% and above on the same loans,” Ham says in his petition.
VERBATIM (PART1)
Uganda as a country celebrated its independences in 1962 however from the current Banking realistic prevailing circumstances, systems and structures in the country today, it’s evident that the country never gained economic independency which has limited the country’s ability to take off hence keeping the economy stagnant.
This calls for Banking reforms that’s if this economy is to attain stable progress and development. Uganda currently stands at a very critical point were majority of its youths and masses are driven by day to day social activities, drama, comedy and cheap emotional politics evident on all its media platforms yet structures, systems and policies that are meant to be the fundamental pillars are left completely unnoticed or un attended, case in point our monetary policy and current weak Banking structures.
First and foremost 95% of Banks in Uganda are foreign Banks under foreign ownership and directorship. These directors don’t even stay in Uganda but are seasonal visitors meaning they lack site of the prevailing circumstances on the day to day economic issues of the country on ground.
Decisions made at top management levels from abroad don’t reflect the actual economic demand on grounds.
It’s in my opinion that all Banks operating in Uganda should have partly local Ugandan ownership in their shareholding with a reasonable number of Ugandan directors that seat at their board of directors with direct involvement in decision making from the top to cater for Ugandan interests as a country.
Secondly these foreign Banks employ mainly foreigners in top management jobs likes C.E.Os, MDs, and top Bank Managers which is totally unfair to Ugandans.
Banks are the major link in all money transactions in the country and Ugandan should hold these top management positions in these institutions to protect the interest of the masses and in line with the realistic reasonable fact that they understand the Ugandan community better, right from cultural and social values, i.e. some things as simple as a language barriers eliminates one from all Banking services as it’s a fact that not all Ugandans are educated yet they require full access to all banking services.
In the same spirit Uganda’s education system has passed so many qualified Accountants and Finance academicians for years, does it mean that none of these have the capacity to hold these top management positions like MDs in these foreign Banks , it’s in my opinion that all MDs to all Banks operating in Uganda should be Ugandan locals. Thirdly these foreign Banks are very discriminating in their day to day operations, they easily extend loans to foreigners compared to Ugandan.
A loan a foreigner applies for and receives in two weeks would take a Ugandan a full year with a lot of hardship, and securities requirements.
The foreign Banks are equally discriminative when giving interest rates on loans where foreigners receive lower interest rates i.e. like 16% on Ugx loans while Ugandans receive interests in the range of 23% and above on the same loans. This is mainly in Banks like Diamond Trust Bank. How do you expect a Ugandan to fairly compete with the foreigners economically on equal footing while trading in the same businesses and same market.
The foreign Banks discriminate against we local Ugandans even when it comes to the amounts of money disbursed or exposure at individual or company levels. Foreign companies are given first priority and larger amounts with much more easier terms under the disguise of corporate governance, while Ugandans and their companies are limited on exposure.
They limit Ugandans to smaller loans for limited investment like small business, arcades and the likes. This is evident on loan balance books of majority of these Banks.
Please check how many Ugandans have loans of 10,000,000 USD and above on the balance books of majority of these foreign Banks.
This has equally frustrated development of Uganda as a country were locals can’t invest in developmental projects that requires huge substantial long term capital investment like Agro Processing and value addition plants that would collectively improve on incomes of Ugandans, promote import substitution, help us penetrate the regional and international markets and help us widen the tax base as a country in the long run.
These Banks offer longer term loans to foreign companies as compared to local companies, local business Men and women. It’s my humble opinion that I propose government should implement total reforms to the Banking Regulations to this regards.
The foreign Bank come to Uganda as investors yet with very limited capital that can’t see this country take off, for as long as they deposit the Ugx 25 Billion requirement with Bank of Uganda , use Ugx 5-10 billion to establish structures with a maximum total of Ugx 40 – 50 billion spent, then start advertising lowering Ugandans to bring deposits and savings with the Bank which makes the core base of their operational capital meaning these Banks operate within our limited capital yet disguising as foreign investors which I find absolutely economically exploitative.
They receive our money in one hand from Ugandans as a deposit or savings and release it through the other hand as a loan at very high interest rates with zero capital input yet they additionally easily extend loans to foreigners as compared to Ugandans.
Despite all the above , these foreign Banks at the end of every year repatriate all the profits they make in our lovely motherland Uganda leaving this economy almost completely dry, How do you expect this economy to take off then?
They repatriate the profits made hiding under outdated laws in comparison to the prevailing current economic circumstances, which provide that they can’t invest the money in Uganda for fear to out compete the people they Borrow/lend yet they can reinvest these profits to recapitalize their Banks raising their single borrowers limits to enable Ugandans have access to more working capital that will enable us invest in developmental projects that can see this country develop.
Insufficient capital in these Banks and inability to fully substantially finance projects has greatly affected Ugandan businesses, most Ugandan businessmen and women have learnt this the hard way i.e a company comes to a Bank with a business investment plan of 10m USD having already invested 50% as equity, the Bank without disclosing its finance capacity and limits since its interested in getting business starts financing the project in partial loan disbursement to a tune of 2m USD, half way the project with a balance requirement of 3m USD to finish the project and have it productive to receive returns the Bank discloses to the customer that their company has reached the single borrower limit of 2m USD .
