Banking in Uganda

1990s–2004

In the late 1990s and early 2000s, the Ugandan banking industry underwent significant restructuring. Several indigenous commercial banks were declared insolvent, taken over by the central bank, and eventually sold or liquidated. These included the Uganda Cooperative Bank, Greenland Bank, the International Credit Bank, Teefe Bank, and Gold Trust Bank. The Uganda Commercial Bank (UCB) was initially privatized through a sale of its majority shares to a purported company from Malaysia. It later became public, however, that the actual buyer was a partnership between Greenland Bank, which was insolvent at the time, and politically connected individuals. A second privatization sale was conducted, with the Standard Bank of South Africa emerging as the winner.

The privatized UCB was merged with the former Grindlays Bank that the Standard Bank of South Africa already owned and had renamed Stanbic Bank. The combined bank is now known as Stanbic Bank Uganda Limited. As of 2008, Stanbic Uganda was the dominant commercial bank in Uganda, with about 27 percent of all bank assets and about 20 percent of all bank branches.

Nile Bank Limited, an indigenous institution, was acquired by the British conglomerate Barclays Plc in January 2007 and merged with its existing Ugandan operations to form the Barclays Bank (Uganda).

A moratorium on new commercial bank licences was declared in 2004 with the passage of a new banking bill in Parliament, which established new banking institution classification guidelines. There are four classes of lending financial institutions under the new regulations as outlined below.

Regulatory changes 2007 - 2010

During the 18 months following the July 2007 lifting of the new banks moratorium, several commercial banks were newly licensed. These included KCB Bank Uganda Limited, Equity Bank Uganda Limited, GT Bank Uganda, Global Trust Bank, United Bank for Africa, Ecobank, and Housing Finance Bank. Three other banks, ABC Bank (Kenya), Access Bank from Nigeria, and CRDB Bank from Tanzania, publicly declared their intention to start banking operations in Uganda.

During 2008 and 2009, several of the existing banks went on an accelerated branch expansion through mergers and acquisitions or new branch openings. As of December 2009, total commercial bank assets in Uganda were estimated at UGX:8.73 trillion. In April 2009, Bank PHB, Nigeria's fifth largest bank at the time, bought 80 percent ownership of Orient Bank, Uganda's eighth largest commercial bank. This brought the number of Ugandan banks with major investments from Nigeria to three.

In October 2010, there were 22 licensed commercial banks in Uganda, with nearly 400 bank branches and almost 600 automated teller machines. At that time, the bank accounts in the country numbered over 5 million. This represented a 16 percent penetration, given Uganda's population of about 32 million at that time.

In November 2010, the BoU directed that all commercial banks in Uganda must raise their minimum capital to UGX:10 billion by March 2011 and to UGX:25 billion by March 2013.

According to a study published in 2010, most of the banking activity was concentrated around Kampala, the country's capital, and other large towns, leaving 42 percent of Ugandans dependent on the informal financial sector and another 30 percent totally excluded from the financial services sector.

After 2010

By April 2011, the number of commercial banks had increased to 23. The bank branches in the country numbered over 400. The banking sector employed over 8,700 people. Total commercial bank assets in the country were valued at more than UGX:11 trillion.

During 2012, the BoU closed the National Bank of Commerce (Uganda) (NBCU), a small indigenous operation with wealthy investors, some of whom held high-ranking government positions. NBCU's deposits were transferred to Crane Bank. In November 2012, the total number of commercial bank branches in the country reached 500.

In June 2012, the BoU estimated the total banking assets in the country at UGX:14.4 trillion. In June 2013, the BoU estimated the total of all commercial bank assets in the country at UGX:15.7 trillion. Those assets had increased to UGX:18.6 trillion by 30 June 2014. As of 31 December 2015, total banking assets in the country were UGX:21.7 trillion.

Tier I financial Institutions

This class includes commercial banks that are authorized to hold checking, savings, and time deposit accounts for individuals and institutions in local and international currencies. Commercial banks are also authorized to buy and sell foreign exchange, issue letters of credit, and make loans to depositors and non-depositors.

Tier II financial institutions

This class includes credit and finance companies. They are not authorized to establish checking accounts or trade in foreign currency. They are authorized to accept customer deposits and to establish savings accounts. They are also authorized to make collateralized and non-collateralized loans to savings and non-savings customers.

The licensed credit institutions as of June 2015 were:

1. Mercantile Credit Bank Limited - A wholly owned subsidiary of General Machinery Limited.
2. Opportunity Bank Uganda - Majority owned by MyBucks Group.
3. PostBank Uganda Limited - Wholly owned by the Ugandan government.
4. Top Finance Bank Uganda

Tier III financial institutions

This class includes microfinance institutions that are allowed to accept deposits from customers but only in the form of savings accounts. Members of this class of institutions are known as Microfinance Deposit-taking Institutions or MDIs. MDIs are not authorized to offer checking accounts or to trade in foreign currency.

The MDIs in the country as of 30 June 2015 were:

1. FINCA Uganda Limited
2. Pride Microfinance Limited
3. UGAFODE Microfinance Limited
4. EFC Uganda Limited
5. Yako Microfinance Limited

Tier IV institutions

These institutions are not regulated by the BoU. They are not authorized to accept deposits from the public. They may, however, offer collateralized or non-collateralized loans to the public. In 2008, it was estimated that there were over 1,000 such institutions in the country.

1. Letshego Microfinance Uganda

Development banks

Investment banks and stock brokerage firms

Investment banks and stock brokerage firms in Uganda are regulated by the Capital Markets Authority and by the Uganda Securities Exchange.

Insurance companies

There were 18 insurance companies in Uganda in January 2015.

Foreign exchange bureaus

As of March 2016, there were 246 licensed foreign exchange bureaus in the country.

Deposit insurance

The Uganda Deposit Protection Fund became operational in 1997. It is funded by premiums charged to every licensed deposit-taking financial institution in the country. Each account is protected up to UGX:5 million. The Depositor Insurance Law was enacted by Parliament and states that all depositors must be paid within 90 days of a bank failure and that the failing institution must be sold by the auctioning of its assets within six months of its seizure by the central bank. If the central bank determines that the failed institution will fetch a better economic return, if sold as a whole, then it will re-open under new ownership and management, provided the new owners and managers meet the approval of the BoU.

Credit bureaux

In 2008, a credit reference bureau was established for the first time in Uganda. The bureau, Compuscan, is based in South Africa and has subsidiaries in Botswana, Namibia, Rwanda, and Uganda, with new ones planned in Kenya and Zambia.

With improved credit risk assessment afforded by the credit bureau, new products, including medium and long-term financing like car loans and mortgages, have been introduced by most Ugandan commercial banks. As of April 2014, interest rates that were formerly in the 20 to 30 percent range had dropped to as low as 10 percent for the best customers at some banks.

In 2015, Ugandan regulators licensed an additional credit bureau, Metropol Credit Reference Bureau Limited. Based out of Nairobi, Kenya, Metropol has operations in Kenya, Rwanda, Tanzania, and Uganda.