Competition stiff as Bank of Uganda licences two new commercial banks

11-April-2012

Competition in Uganda’s banking industry is set to toughen following the Central Bank’s issuance of two new operating licenses to two banks, one from Kenyan and another from India.

Bank of Uganda on February 15 and March 22, 2012, licensed NIC Bank from Kenya and the Bank of India, respectively to commence retail banking business in the country.

This brings the number of banks operating in the country to 25, from the current 23, providing the banking population with more alternatives to choose from, something that is resulting into cheaper, affordable and better services in the industry due to stiff competition in the industry.

Mr Peter Ochienghs Patel, the aBi Trust Financial Services Manager told Daily Monitor in a telephone conversation yesterday that, it would be better if such new entrants extend banking services to the country’s unbanked population, which is mainly spread in rural areas.

“Access to financial services is a big challenge in this economy, especially to low income earners. It would be good if such banks spread out to serve the un-served population to boost financial inclusion,” Mr Ochienghs said.

It is estimated that Uganda’s banked population is only 3 million, yet majority of the banked people have multiple bank accounts, something that lowers the rate to insignificant numbers.


However, Bank of Uganda director for communications, Dr Jan Tibamwenda, told this newspaper that being a liberalised business environment, the central bank does not compel commercial banks to extend their services to rural areas.

He said the regulator has created an enabling environment that makes it easy for banks to operate in any part of Uganda and that it approved them (banks) to get into partnership with telecom companies to offer among other mobile money services to increase financial inclusion.

Bank of Uganda early last year raised the minimum paid-up capital for commercial banks from Shs4 billion to Shs25 billion, a requirement that must be fulfilled by the existing commercial banks by March 2013 and a requirement for any new institution seeking to transact commercial banking business in Uganda to be granted an operating license.

The increment seeks to make local commercial banks more liquid and boost investor confidence in Uganda’s banking industry.

The two new institutions at a glance
Invested in liquid assets. According to BoU, each of the two institutions have invested the required Shs25 billion in the liquid assets.
Planned investment. A Kenyan magazine recently reported that NIC was planning to invest at least Shs27.96 billion (KShs960 million) to start operations in Uganda.
Planned investment. NIC Bank is also, according to reports planning a Shs58.3 billion (KShs2 billion) rights issue by end of July to mobilise capital for its expansion.

By Faridah Kulabako: The Monitor Newspaper