Overview:
Private sector credit growth declined in FY2023/2024 compared to the previous year, falling to 7.8% in the nine months to March 2024.
Uganda’s banking sector has demonstrated remarkable resilience, with total assets expanding by 9.94% to Shs50.48 trillion in the year to March 2024. This growth is a testament to the sector’s ability to adapt and thrive in a challenging environment.
According to Ramathan Ggoobi, Finance ministry permanent secretary and Secretary to the Treasury, “The banking sector’s performance is a positive indicator of its capacity to navigate complex economic conditions.” However, he also emphasized the need to address the issue of high interest rates, which can hinder economic growth and limit access to credit for businesses and individuals.
The report reveals a 6.84% growth in the deposit base to Shs34.20 trillion, while total advances increased by 6.79% to Shs20.57 trillion. Notably, the level of intermediation slowed down, with a lower growth in total advances compared to the previous year.
The banking sector’s profitability also improved, with a net profit after tax of Shs1.5 trillion for the year ended December 31, 2023, up from Shs1.2 trillion in the previous year. The net profit after tax for the first three months to March 31, 2024, amounted to Shs413.16 billion, representing a 3.68% growth compared to the same period last year.
Furthermore, the report highlights a decrease in non-performing loans by Shs68.22 billion (5.99%) to Shs1.07 trillion, resulting in an improvement in the ratio of non-performing loans to total loans and advances from 5.72% to 5.05%.
In terms of exchange rate developments, the Uganda shilling exhibited stability against the US dollar in the Financial Year 2023/24, depreciating by only 0.8% to an average mid-rate of Shs3,781.4 per US dollar. This stability is a positive sign for the economy, as a stable currency can attract foreign investment and promote trade.
Private sector credit growth declined in FY2023/2024 compared to the previous year, falling to 7.8% in the nine months to March 2024. Shilling-denominated loans were the primary driver of growth in private sector credit, growing at an average of 9.6%, albeit lower than the previous financial year’s average growth of 12.0%.
Ggoobi emphasized the need to address challenges such as high interest rates and non-performing loans to ensure sustainable growth in the banking sector. “The sector’s resilience is a positive indicator, but we must continue to work towards creating a more conducive environment for economic growth,” he noted.