Bank Lending Rates To Stay High

Following the Bank of Uganda monetary policy report February 2021, most banks currently operating in the country project their lending rates to remain broadly unchanged even though there could be a relatively lower Central Bank Rate (CBR)and the Bank Lending Survey(BLS).

Commercial banks’ lending rate on Shilling loans averaged 18.8% in quarter to December 2020 down from 20.2% in quarter to September 2020 partly reflecting the lag in the monetary policy transmission mechanism.

“Lending rates on forex loans rose to an average of 6.1% from 5.7,% in the same period,” says the report.

Furthermore it states that Private Sector Credit (PSC) by Financial Corporations (Banks and UDB) grew by 10.2% in December 2020 up from 9.5% in the previous quarter supported partly by gradual economic recovery and lower cost of borrowing.

The same report noted That Net extensions by banks picked up in the quarter to December 2020 although they are still below pre-COVID levels. There was an increase in both the value of loan demand and supply within the quarter to December 2020.

It adds that the value of loan applications and approvals increased to Shs4.9 trillion and Shs2.9 billion in the quarter to December 2020 from Shs4.2 trillion and Shs2.7 billion in the Quarter to September 2020 respectively.