Govt Will Withdraw its Money from “Blood-sucking” Commercial Banks, Says Museveni

President Yoweri Museveni.

President Yoweri Museveni has labeled commercial banks in Uganda “blood suckers” for their hefty lending rates which most Ugandan businesses can not afford.

He said for the cost of credit to be at 23 percent in commercial banks is “theft”.

“Why should commercial banks continue to lend at 23 percent? That’s just theft. We [government] are going to say bye [to the banks] and we go,” the President said Friday while opening the NRM Parliamentary caucus at the National Leadership Training Institute in Kyankwanzi.

He made the comment as he explained the need to create a favorable environment for investment in Uganda. Museveni said there is need for government to invest more in capitalizing the Uganda Development Bank (UDB) in order to support local businesses and spur economic growth.

“That’s why I want you to support me in putting more money in UDB. For our farmers, manufacturers, those who build hotels and some aspects of tourism, we shall give them low cost money not more than 12 percent”.

He threatened government would withdraw its money from commercial banks that have stiffled local businesses.

“And we are going to withdraw our money from those banks because we have been putting money in those banks. You know they have their agents in the government system. They are sharing I don’t know what… How can you share with a blood sucker? So, I don’t want any more sharing with those commercial banks”.

Museveni said enabling foreign direct investment easily into the country, as well as availing credit (that is not more than 12 percent interest rate) to youths will enable Uganda address the current bottlenecks.

The issue regarding the unaffordable interest rates has for long been central to the debate on Uganda’s economic environment, many arguing that the high cost of credit is increasingly making it difficult for businesses to acquire finance for growth.

With majority of the commercial banks lending rates currently exceeding 20 percent, experts say that the bulk of the start-ups as well as Small and Medium Enterprises (SMEs) already struggling with insufficient capital and limited assets can not service loans.

In the 2017/18 financial year, for 11 consecutive months, the Central Bank persistently eased its signaling lending rate (CBR) to a record 9% with hope that the commercial banks would follow suit in lowering their interest rates. The CBR declined by eight percentage points between April 2016 and March 2018.

However, the commercial banks kept their rates up, citing non performing loans and high operating costs.

Economists argue government’s persistent borrowing from the private sector partly explains why these rates have not been lowered.

Museveni believes that with more capitalization of UDB, manufacturers and the business community can be able to access cheap credit.

Although government had announced a Shs 500 billion capitalisation of UDB in 2015, between 2015 and 2017, UDB got a total of Shs 39bn and Shs 50bn in the year 2018. The bank focuses on manufacturing, infrastructure, agriculture, tourism and hospitality and human development.

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