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Financial institutions have restructured nearly half of their loan portfolio, signaling the devastating effect of Covid-19 on the economy.
Dr Adam Mugume, the Bank of Uganda director for research told Daily Monitor that banks by January had restructured nearly half of their loans, which represented 46 per cent of the total loan portfolio in the banking sector.
This was an increase from 40.5 per cent recorded in September, which was translating to Shs6.73 trillion of restructured loans.
However, according to a banking sector market report by Stanbic Bank, by December 2020, restructured loans stood at Shs7.7 trillion, reflecting 44.6 per cent of sector gross loans. At least loans worth Shs764.5b of those that had been restructured were overdue by then.
The Central Bank had last year asked financial institutions to restructure loans for customers on a discretionary basis to cushion the economy from the effects of Covid-19.
The credit relief period, which had been expected to end in April, was extended by Bank of Uganda for another six months effective April 1.
Ms Anne Juuko, the Stanbic Bank chief executive officer, said the Central Bank's credit relief measures were instrumental in moderating the rise of non-performing loans. Increasing NPL's affect banks' asset quality, which in turn impacts the economy.
Mr Sam Mwogeza, Stanbic chief financial officer, revealed that those material outstanding restructures, especially in the education and tourism were because they were still locked, noting that whereas the banks' asset quality had been deteriorating prior to Covid-19, it was now worsening.
The non-performing loan ratio grew to 5.3 per cent in December from 5.1 per cent in September... Read more on All Africa
Source: All Africa