Today in Uganda we have a very weak banking structure which is totally compromised. We received our independence in 1962 but it is unfortunate that we still lack economic independence. The Ugandan banking industry is 95 per cent owned by foreign banks, which is not bad because they come in to help and with capital.
The unfortunate bit is that they fully own these banks. I am of the view and opinion that Ugandans should have a shareholding in all these banks operating their businesses in Uganda.
It is unfortunate that the decision-makers or the would-be directors sit outside and don’t have sight on the prevailing circumstances on the ground on a daily basis. So, I call upon government to make reforms to that effect.
Secondly, these banks mainly employ foreigners when it comes to managing directors (MDs) and chief executive officers (CEOs) as well as high-level managers. I find this unfair to Ugandans and Uganda as a country because we have had a very good education system for a long period of time.
I’m of the view that we have qualified accountants and financiers that have got the capacity to hold these jobs of CEOs, MDs or even managers in each and every one of these financial institutions. Therefore, I call upon government to make reforms for every bank operating in Uganda, whereby the MD should be Ugandan.
It is advantageous for local businessmen in that that when we have a local manager in a bank, they can easily address the challenges of ordinary Ugandans. It is a fact that not all Ugandans are educated. Some are illiterate but they find it a barrier to communicate to these foreign MDs; so, they are closed out of the entire banking system and services, which I think is completely unfair.
Thirdly, these banks are very discriminative, yet they are operating within our motherland Uganda. They discriminate when it comes to matters of giving loans to foreigners and to Ugandans. For instance, a foreigner can walk into a bank and get a loan within two days, but it takes a Ugandan more than a full year to receive the same loan.
When it comes to interest rates, foreigners enjoy better interest rates compared to Ugandans. Whereas foreigners get interest rates of 16 per cent and below, Ugandans are charged interest rates of 20-23 per cent and above, which I find completely unfair.
Foreigners are given much more money with ease while Ugandans are limited to smaller loans. This hinders Ugandans from advancing into developmental projects that require substantial amounts of money that can make an impact.
Take agro-processing or projects that require setting up factories; they make a difference in our economy and to the population at large. So, I call upon government that when it comes to issues of distribution of money in banks, Ugandans should have the bigger say.
LIMITED CAPITAL
Meanwhile, I have noted that these banks often come to Uganda as investors yet they have very limited capital. They are undercapitalized; so, I call upon government to task these banks to recapitalize and fall within the gap of foreign investment as a prerequisite to earn our respect.
These banks come in Uganda with capital of approximately Shs 40 billion to Shs 50 billion. Their loophole is to deposit 25 per cent with Bank of Uganda (BOU) and then the remaining Shs 5bn to Shs 10bn is used to form up structures. Afterwards, they embark on an aggressive advertising strategy that lures unsuspecting Ugandans into banking their savings and deposits with them.
This, in turn, becomes the capital base of their core operating capital. So, eventually, they end up using our money as capital to run their banking business, which is completely unfair and very unreasonable.
PROFIT REPATRIATION
Thereafter, these banks then carry out profit repatriation. This is a situation where the banks take all the money out of the country, thereby depriving the country of this capital, which capital is essential for the development of our systems and structures in areas like agriculture, factories and industries.
They have taken this money for years under the disguise of fishy legislation that they cannot invest here to outcompete those they lend to, which is outdated. Put simply, they exploit this nation’s legal framework for their own gain. Therefore, I call upon the government to rein in these banks and put regulations in place whereby that capital/ money made in Uganda has to stay in Uganda.
NEW OPPORTUNITIES
This money should be used to explore our untapped resources. For instance, why look for investors in our oil and gas industry when we have banks that keep on taking money out since the colonial times? Why don’t these banks use it to recapitalize their banks so that borrowers’ limits rise so that Ugandans can have access to bigger loans to help them invest in developmental projects?
AMEND LEGISLATION
From my experience, I have come to the realization that these banks have also compromised our legal system and structure.
Uganda’s legal framework is very weak when it comes to factors like banking laws and regulations. It is evident and it is a fact that no person goes to a bank unless they are financially stable. So, by the time a person goes to a bank, it means they are financially solid. This basically shuts out brilliant and creative ideas due to lack of capital.
The majority of people who go to banks do so either when they have land and they need construction funds or when they have already started constructing and they need money to complete the project or when they have small businesses and they are looking to expand them.
So, at the end of the day, the banks come in as a financial support structure to help these people move up. It is unfortunate that when a bank gives a five-year loan to an individual, and three years down the road even after paying sufficiently, a person defaults for three months, the bank comes in to take all their properties. This is completely wrong.
If someone runs to courts of law to have an account audit and reconciliation, these banks hide under the Mortgage Act. Regulation 13 of the Mortgage Act stipulates that anyone with an interest to have legal proceedings against any banking institution in Uganda has to first deposit 30 per cent of the disputed figure with that bank.
This is inconsistent with Article 28 of the Constitution that provides for a right to fair hearing to each and every Ugandan. Article 26 of the Constitution further provides for a right to property.
Yet in spite of the glaring facts, banks have used this loophole to exploit businesspeople. How can a person who has run to court for justice be turned into a target by asking him to first make a deposit before he can be heard by the courts of law?
This is unfair and I believe this should be changed.
It is on this background that me, as head of Ham enterprises, took Diamond Trust Bank (DTB) to court because they tried to apply this clause on me and they were unsuccessful. Though I managed to fight them off, this clause remains an impediment for many Ugandans. I have decided to proceed with a constitutional petition to have this unfair law scrapped out of our legal structure and system.
Therefore, I call upon all Ugandans to come together and support each other as an obligation to see that our country moves forward.
May God bless us and may God bless our country Uganda!
The author is CEO, Ham Enterprises.
