The value of loan approvals in commercial banks rose to Shs2.8 trillion in the quarter to October 2021, reflecting improved economic activity following the easing of the lockdown.
According to the Bank of Uganda (BoU) State of the Economy report for December 2021, the value of loan approvals, a proxy for credit supply, rose to Shs2.8 trillion in the quarter to October 2021 from Shs2.2 trillion in the quarter to July.
The value of loan applications, which is a proxy for demand for credit, rose to Shs4.9 trillion in the quarter to October 2021 from Shs3.7 trillion in the quarter to July 2021
“Demand and supply of credit improved in the quarter to October 2021, reflecting improved economic activity following the easing of the lockdown,” the report released on Monday, December 27, 2021, reads in part.
“Both the number of loan applications and loan approvals picked up in October 2021, having declined for a couple of months previously,” the report adds.
However, commercial banks’ asset quality declined, with the share of Non-Performing Loans (NPLs) to total loans rising to 5.4 percent in September 2021 from 4.8 percent in June 2021. The share of NPLs to loans increased for all sectors except manufacturing and mining & quarrying.
“The increase in the NPLs to GDP ratio across economic sectors reflects the adverse impact of pandemic related restrictive measures instituted to mitigate the spread of the virus,” the report states.