Bank of Uganda (BoU) has issued commercial banking licenses to two financial institutions – Afriland First Bank Uganda Limited and Opportunity Bank Uganda Limited – bringing the total number of commercial banks in Uganda to 26.
The Governor Bank of Uganda, Emmanuel Tumusiime Mutebile said in a statement that BoU granted the Commercial Banking (Class 1) License Certificates to Afriland First Bank Uganda Limited effective September 12, 2019 and Opportunity Bank Uganda Limited effective September 13, 2019.
While Opportunity Bank has previously been trading, it was categorized as a Credit Institution (Tier 2). With effect from September 12, the financial institution transformed to a Commercial Bank (Tier 1) institution.
The Financial Institutions Act, 2004, defines a commercial bank as a company licensed to carry on financial institution business in Uganda and whose principal business consists mainly in the acceptance of call, demand, savings and time deposits withdrawable by cheque or otherwise, in the capacity of a bank.
Commercial banks also provide; overdrafts and short to medium term loans; foreign exchange, participation in inter-bank clearing systems and assumption of guarantees, bonds and other warranties on behalf of others.
Section 10 (1) of the Financial Institutions Act states that a company proposing to transact or carry on business as a financial institution shall apply, in writing, to the Central Bank for a licence.
The same law stipulates that an application for a licence shall contain; the name and address of the proposed financial institution; the directors; the shareholders; the nationality of directors; the nationality and shareholding of each shareholder; the proposed location where the financial institution is going to operate from; the estimated number of persons to be employed; the capital structure and earning prospects of the financial institution.
The applicant will also provide details of the institution’s financial plans and earnings forecasts namely, balance sheet, income statement and cash flow, for at least three years and sufficient detail to describe the operating plan, demand for financial products and services and existing competition in the proposed market.
The Act also requires the applicant to state the class of licence in which it seeks to be licensed. There are different classes of licences – commercial bank( Class 1); post-office savings bank (Class 2); merchant bank (Class 3); mortgage bank (Class 4); credit institution (Class 5); acceptance house (Class 6); discount house (Class 7); and finance house (Class 8).
Section 12 (1) of the Act states that the Central Bank shall, within six months after receipt of an application, or of the additional information or clarification referred to in subsection (7) of section 10 of this Act, investigate and prepare a detailed report in respect of each application.
The Central Bank shall within fourteen days after the period 6-month period consider the application and the report, and shall grant the licence if it is satisfied that the application is in accordance with this Act.
Bank of Uganda can also grant the applicant a conditional licence with such conditions as it may deem necessary, grant a limited licence covering only the part of financial institution business for which it is satisfied that the applicant meets the requirements of this Act or refuse to grant the licence for reasons that shall be stated in the letter of refusal.
According to the law, the Central Bank shall, within seven days after its decision inform the applicant of its decision in writing.
Below is a list of the commercial banks supervised by the Central Bank