Uncertain future for Mercantile Bank depositors awaiting compensation

KAMPALA – The fate of thousands of depositors who had saved heavily in the defunct Mercantile Credit Bank remains uncertain as they continue to await compensation from the Bank of Uganda.

The bank’s closure in June last year has left many depositors on the brink of financial ruin, with some struggling to make ends meet. Despite assurances from the Bank of Uganda that compensation would be paid, many large depositors are yet to receive their funds.

“We’re talking about people who had invested their life savings, their businesses, and their livelihoods in Mercantile Credit Bank,” said Samuel Aliku, chairman of the local council in Pepsi-Cola village. “The delay in compensation is pushing them to the wall, and many are on the verge of collapse.”

The Deposit Protection Fund, which provides deposit insurance to customers of licensed banks, has paid out up to UGX 10 million to smaller depositors. However, this amount is a drop in the ocean for large depositors who had invested millions of shillings in the bank.

Steven Kasenge, an auditor and investment club member who had invested in Mercantile Credit Bank, criticized the Bank of Uganda’s communication on the payment process. “The unfortunate thing is that communication has not been forthcoming. Even when they reimbursed some money, the large depositors just checked their accounts and found it. They have not given a roadmap of how it will be paid in full.”

Financial experts warn that the delay in compensation is not only affecting depositors but also having a broader impact on the economy. “Businesses are collapsing, jobs are being lost, and the economy is suffering,” said Richard Byarugaba, a retired banker and financial expert.

Philip Katamba, a financial advisor, called for the government to raise the protected deposit limit. “Regulators have increased the capital requirements for commercial banks, but the protected deposit limit remains unchanged. This inconsistency needs to be addressed to prevent similar crises in the future.”

However, Byarugaba defended the Bank of Uganda’s decision to increase capital requirements for commercial banks. “The global financial sector is becoming riskier, and the Bank of Uganda needs to take steps to ensure that banks can withstand turbulence.”

Angelo Izama, a journalist, called on the Bank of Uganda to be more flexible in its engagement with large depositors. “These depositors are facing significant exposure, and the Bank of Uganda needs to find a way to navigate this process.”

The Bank of Uganda has come under increasing pressure to provide clarity on the compensation process and to take steps to address the concerns of depositors.