Bank of Uganda maintains ban on payment of dividends

The Bank of Uganda (BoU) has said it is not yet safe enough for the banking industry to start paying dividends to their shareholders two years since ban was announced.

BoU, the industry regulator, in guidelines to the banking sector suspended payment of dividends to shareholders, a move aimed at shielding the industry from Covid-19 related shocks.

The other guidelines included a halt on loan repayments and interest as the customers were expected to have lost businesses due to the local and international lockdowns.

In September 2021, some of these credit relief measures were lifted, save for loans held by the tourism and education sectors that were extended for another 12 months.

Now, as the country goes into the third year since then, investors in the banking industry are querying the continued suspension of the dividend payments yet the companies have been making profits.

But BoU Director for Commercial Banking Hannington Wasswa says the regulator’s decision to suspend dividends by the banks and other Central Bank – regulated business was aimed at protecting the sector, because dividends could reduce their capitalisation levels.

Stanbic Bank Chief Executive Officer, Anne Juuko said that on their part, they are ready and willing to pay dividends any time that the regulator allows them.

Speaking at the release of the bank’s financial performance statements for the year 2021 on Wednesday, Juuko said they got good explanation from the BoU which they agreed to and hope that the suspension of dividend payout will be lifted soon.

However, Wasswa says that any bank that feels they are strong enough in terms of working capital, it may compile a report to BoU, explaining so, which would allow the regulator to give the bank a greenlight to pay.

For now, Wasswa says the industry is not yet ready to risk that because the economy is yet to even experience the real effects of the pandemic.