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Costs on lending rates counterproductive, says BoU
Bank of Uganda governor Emmanuel Mutebile. COURTESY PHOTO
What you need to know:
- The remarks, were a reaction to findings which pointed out that banks are mainly used for savings, and of the 46 per cent who borrow, only 3 per cent take credit from banks.
- The survey, also pointed out that many borrowers are from urban areas.
Bank of Uganda deputy governor Louis Kasekende has said banks must think through the issue of instituting administration costs on lending rates because it locks out a number of borrowers.
Speaking at the launch of a FinScope survey in Kampala, Mr Kasekende said banks need to curtail the cost of service delivery to boost loan uptake.
“Administrative ceilings on lending rates are counterproductive because they make lending to small scale borrowers unviable,” he said.
The remarks, were a reaction to findings which pointed out that banks are mainly used for savings, and of the 46 per cent who borrow, only 3 per cent take credit from banks. The survey, also pointed out that many borrowers are from urban areas.
Ms Rashmi Pillai, the Financial Sector Deepening Uganda director programmes, said the study found out that people prefer informal sources of credit because them easy to deal with.
“Maybe our processes take long. It also means we should examine ourselves and see how quickly we can respond,” he said.
