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Deposits shoot up in financial sector

There was an increase of deposits within Uganda’s banking sector between June 2018 and June 2019, according to the latest report from the Deposit Protection Fund, spurred by positive economic growth, especially the investments in energy and infrastructure, writes AARON GAD ORENA.

Total deposits within the banking sector grew by 8.9 percent to Shs 22 trillion in June 2019, from Shs 20 trillion in June 2018, according to the report. The total assets of the banking sector increased by 10.5 per cent to Shs 30.3 trillion in June 2019, from Shs 27.4 trillion in June 2018.

According to the report, the asset growth was mainly on account of an increase in the loans offered, which grew by 11.2 per cent, and a 14.7 per cent jump in the holdings of treasury bills and bonds.

Asset quality of the banking sector continued to improve during the period under review. As at June 30, 2019, the aggregate industry non-performing loans (loans that customers have failed to pay back) and advances to gross loans and advances stood at 3.8 per cent, an improvement from 4.4 per cent in June 2018.

The role played by credit institutions has grown over the years as they lend more money but mostly to small businesses. The total assets held by the subsector grew by 56.3 per cent to Shs 963 billion at the end of June 2019, according to the report. Similarly, net loans and advances increased by 76.6 per cent while total deposits rose by 5.8 per cent over the period under review.

Growth in total assets in the subsector was partly attributed to the licensing of BRAC Uganda Bank Limited, a leading credit institution as a Tier II financial institution. Microfinance deposit-taking institutions held Shs 562.2 billion in assets at the end of June 2019, an increase of 16.6 per cent.

The increase was on account of an increase in gross loans of Shs 55.2 billion, increased investment in the fixed assets of Shs 14.9 billion and growth in balances of Shs 5.5 billion held with financial institutions as at end of June 2019.

The mechanisms that were put in place in terms of legislation in the Financial Institutions Act of 2004 when the Deposit Protection Fund was made a legal entity have restored the confidence of many Ugandans across all tiers of the banking sector and this has also stimulated the growth in the industry, the report notes.

DPF, through its act of deposit protection, provides insurance to a large number of retail depositors in that it makes sure that they are paid in time even in the event of a closure of a financial institution.


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