Overview:
Operational resilience across supervised financial institutions improved during the period, although the central bank cautioned that cyber threats, while lower, continue to pose risks for some institutions. The Bank said these risks could have implications for operational continuity if not adequately managed.
Uganda’s banking sector remained stable and resilient to shocks as of the end of September 2025, supported by strong capital buffers, improved liquidity conditions, and easing credit risks, according to the Bank of Uganda’s latest Financial Stability Review.
The central bank said domestic risks to financial stability remain moderate despite heightened global uncertainties, citing robust economic activity, low inflation, and a broadly stable exchange rate as key anchors of stability.
In its snapshot review, the Bank of Uganda noted that macroeconomic risks continue to hover largely due to external factors, including global trade uncertainty, stretched asset valuations, and rising sovereign debt levels worldwide. However, the central bank emphasized that Uganda’s domestic economic indicators remain strong enough to cushion the financial system from major shocks.
Liquidity conditions in the banking sector improved markedly during the review period. The industry-wide Liquidity Coverage Ratio (LCR) stood at 657.8 per cent in September 2025, far above the regulatory minimum requirement of 100 per cent. The improvement was attributed to lower wholesale funding costs and shilling liquidity injections arising from the central bank’s foreign exchange purchases aimed at building reserves.
“Banks are operating with substantial liquidity buffers,” the Bank of Uganda said, adding that liquid assets across the sector increased, enhancing resilience to short-term funding pressures.
Credit risk also eased, with the Non-Performing Loans (NPL) ratio improving to 3.66 per cent in September 2025, reflecting better loan quality and recovery in economic activity. Loan growth strengthened to 9.5 per cent, supported by improved credit infrastructure and government initiatives, including the Parish Development Model.
Operational resilience across supervised financial institutions improved during the period, although the central bank cautioned that cyber threats, while lower, continue to pose risks for some institutions. The Bank said these risks could have implications for operational continuity if not adequately managed.
The sector’s strong performance has been underpinned by robust capital and liquidity buffers. All supervised institutions met the 100 per cent minimum requirements for both the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR). Domestic Systemically Important Banks (D-SIBs) also complied with additional systemic risk buffer requirements.
To sustain financial stability, the Bank of Uganda said it continued to implement macroprudential policy measures, strengthen inter-agency coordination through the Financial Sector Stability Forum, and apply Prompt Corrective Actions where institution-specific vulnerabilities were identified.
The central bank also issued new guidelines on the management of climate-related financial risks and licensed three large Savings and Credit Cooperative Organisations (SACCOs), with additional applications currently under review.
Overall, the review suggests that Uganda’s banking sector enters the final quarter of 2025 with strong buffers and improving asset quality, even as global economic headwinds persist. Analysts say the challenge ahead will be maintaining resilience amid evolving external risks while supporting credit growth needed to sustain economic recovery.