By Kagenyi Lukka
Igara East Member of Parliament, Micheal Maranga Mawanda was granted leave of Parliament to introduce the Bank of Uganda Amendment Bill 2019.
The MP reasons that the bill seeks to separate the fusion between the Bank of Uganda (BoU) management from the board of directors.
Further according to Mawanda, since Government delayed to bring constitutional amendment within the 90 days, Mawanda says the bill aims at saving the central bank. In his justification,Mawanda says there is a problem of accountability which should be changed.
The legislator’s move follows government’s delay or failure to table before parliament the much needed reforms at BoU as recommended by Parliament’s Committee on Commissions Statutory Authorities and State Enterprises (COSASE) following the exposure of the enormous rot at institution.
Bank of Uganda wantonly closed banks since 1993 without any reasonable justification. These banks are; Teefe Bank (1993), International Credit Bank Ltd (1998), Greenland Bank (1999), The Co-operative Bank (1999), National Bank of Commerce (2012), Global Trust Bank (2014) Crane Bank Ltd (CBL)
For all the banks mentioned in the foregoing paragraph,BoU had varying dishonest reasons. The banks that were closed had a chance of surviving if BoU had not been vindictive.
Lies told about Crane bank.
Crane bank which was formerly owned by Dr.Sudhir Ruparelia was more pertinent to Uganda’s banking sector having developed a wide base of clients since its inception.
Under the false claim that crane bank was insolvent, BoU took it over and went ahead to donate it to dfcu at Ugx.200 billion.
A well calculated and choreographed propaganda by incompetent BoU managers and their cohorts painted an ugly picture of Uganda’s former glorious commercial bank.
In 2018,Mr Emmanuel Tumusiime Mutebile(governor BoU) while making a speech at the Uganda Banker’s Association Annual Banker’s conference noted that the inventory of crane bank found that the bank was massively insolvent, with core capital of negative Shs.240 billion, as a result of mismanagement and fraud.
This is one in many bizarre theories that have been advanced by proponents of falsehoods and hypocrisy.
Assuming such a theory is to be believed that Crane Bank was too insolvent and its loans too toxic, how come dfcu Bank registered a 101 per cent jump in total income from Shs257.3 billion in 2016 to Shs517.3 billion in 2017, leading to a 134.4 per cent growth in after-tax profit from Shs45.3 billion to Shs106.2 billion?
According to a forensic audit by PWC on behalf of BoU in December 2016, Crane Bank as of March 2016 only accounted for 20 per cent of the entire banking industry’s Non Performing Loans (NPL’s).
In comparison, in 2014, Standard Chartered Bank had Shs200.8 billion in bad loans.
At that time, Standard Chartered bank’s bad loans accounted for more than 42 per cent of the entire banking industry’s NPLs (Shs477 billion).
previous year (2013),SCB had 29.2 per cent of industry bad loans of Shs120.1
billion out of a total of Shs411.5b in bad loans.
In both years, Standard Chartered’s bad loans were more than six times bigger than Crane Bank’s bad loans – but Standard Chart Bank was never closed
Truth be told that in 2016,most banks were holding back on lending, Crane Bank, who until 2015 had modest NPLs, loosened their loan taps a little bit more.
Other factors in the economy such as high interest rates, high government domestic arrears and a weak Shilling, most businesses defaulted on paying back the borrowed monies.
It should be noted that interest rates between 2010 and 2018 have been at 22.6 per cent. It is also the period in which there has been a record decline in Private Sector Credit growth from annual growths of 34.1 per cent in 2010 to a mere 6.2 per cent in 2017.
During the same period, we saw Non-Performing Loans to gross loans grow by more than 5 times from 2.1 per cent in 2010 to 10.5 per cent in 2016. Although this eased to 5.59 per cent by end of 2017, this is still the 3rd highest rate in 14 years!
The available results for the banking industry show that Stanbic Bank, the country’s biggest lender, reported that NPLs have worsened from 1.5 per cent in 2015 to 3.2 per cent in 2016 and more than doubled in 2017 to above industry figures of 6.8 per cent.
Centenary Bank, one of the big banks reported Shs80 billion in NPLs. And the banks are reacting by not lending despite having the money.
For example, in their 2017 results, Stanbic reported that their gross loans to total deposit ratios- the ratio that measures what percentage of a bank’s deposits are actually being lent out, had reduced from 82.7 per cent in 2013 to 60.7 per cent in 2017 while dfcu’s ratios have reduced from 88 per cent to 67 per cent in the same period.
In summary, lies should not overshadow the truth. Managerial incompetence especially at the helm of such an institution is intolerable. The population deserves a more compelling explanation so that the same scenario doesn’t reoccur.
The author is a current affairs analyst and aspiring MP Ikiiki County in Budaka district.