BOU SHOCKS BANKING SECTOR WITH TOUGH RULES IN ITS LATEST PROPOSAL.

Bank of Uganda (BoU) plans to sky rocket the paid-up capital requirements of financial institutions in the country. A move that makes it harder for locals to start banks. the latest proposal shall result into consolidation among the small existing financial institutions. 

BoU has proposed to raise commercial banks’ paid-up capital from Shs25b to Shs150b. The paid-up capital for ‘credit institutions’ will jump 25 times from the current Shs1b to Shs25b while the paid-up capital for micro-finance deposit-taking institutions (MDIs) will jump from Shs500m to Shs10b. 

“….the increase in paid-up capital is long overdue and is intended to match the dynamism in the economy, incentivise shareholder commitment, and enable institutions to withstand shocks and to converge with regional peers among whom Uganda effectively has the lowest paid-up capital.” said Tumubweine Twinemanzi, the director of supervision at BoU.