Contract financing decline in current economic climate
The financial sector a core of the economy has not been an exception to the pandemic and is still trying to recover from the effects of the COVID-19 surge. In Uganda the election period ushered in the new year.
This obviously comes with only hope for peaceful transition if any and only detest for riots that disrupt the recovery process of businesses. One mostly affected are contract financiers who if not a bank, is a money lender. These are important in procurement process and further more implementation of works or supply of services noted in the procurement documents.
Suppliers have toned down their deliveries and halted works waiting for assurance of safer operating environments. This trend of events leaves contract financiers worried if the borrowers can’t repay acquired loans in time.
According to the banking sector demand for credit was rising steadily since August after a slowdown in the months between April and June when the country was under a lockdown.
Defending lenders further is The Uganda Bankers Association which recently refuted claims that the bankers were withholding lending to the private sector in favor of investing in government bonds and treasury bills which are considered safer and largely risk-free. Instead, they say and maintain that it is the private sector which reduced the appetite for credit due to the uncertainty in the business environment.
The Association of Microfinance Institutions of Uganda (AMFIU) argue that in recent months over 100 of its members do not have enough working capital to meet the demand since they are still recovering from the lockdown and recent election period.
However the micro finance institutions are hopeful that the compensation by government can help them get back on their feet which directly boosts procurement processes.