The Bank of Uganda (BOU) has warned citizens to be cautious when borrowing money from financial institutions and banks, to avoid losing their property due to failure to service or clear off their loans.
This was contained in Bank of Uganda’s Executive Director for Finance, Mr. Richard Byarugaba, while speaking on behalf of Governor Micheal Ating-Ego at a training workshop on the Small Business Recovery Fund (SBRF) and Agricultural Credit Facility (ACT) organized at Ssaza grounds in Sembabule district on Friday.
Under the initiative, agricultural loans of up to Shs.500 billion are issued under Agricultural Credit Facility (ACF) at an annual interest of 10%, Small Business Fund (SBF) loans of up to Shs.500 million to small businesses by individuals or groups at an interest rate of 12% per annum, and Small Business Recovery Fund (SBRF) loans of up to Shs.10 billion at 15% annual interest rate.
The engagement was attended by leaders, residents as well as officials from commercial banks including Opportunity, Centenary, DFCU, Stanbic, Pearl Bank, Housing Finance Bank, among other financial institutions.
During the workshop, residents raised complaints of stringent collateral requirements, high interest rates, limited financial literacy, and a general mistrust of formal financial institutions. The factors are said to contribute to widespread financial exclusion limiting opportunities for personal and business development.
In response, Richard Byarugaba warned banks that are sabotaging government’s initiative. He added that as Bank of Uganda, they pick interest in the barriers and will soon take action.
“It’s true and we have heard about it they tend to divert the money and we have handled some complaints but also we encourage the public to be ready with what is required, the documentation most of them don’t have any records about the business, so when the banks ask them for records, licenses, they tend to say this is government money, why are you asking me all these questions but also borrowers have the responsibility of providing the information that is required by banks to assess their credit worth whether they can really pay back the money because this money is to be paid back”.
Meanwhile, Richard Byarugaba urged citizens to check the loans they are taking before signing the documents to avoid being lured into non affordable loans.
“Don’t rush to sign for the loan even before knowing the type of the loan you’re securing, to ensure it is affordable”
Some of the officials from various banks in their defense said that they are trying to improve services with most of the complaints having been addressed already.
Closing the workshop, Minister of State for Finance in charge of Micro-Finance Hon. Shartsi Kuteesa Musherure, who was the chief guest, warned heads of financial institutions through which government funds are passed to ensure affordability of loans for the government’s target to be hit.
“let’s do as we have discussed during these presentations, let the program be transparent ant affordable to the community”
However, she urged Sembabule residents to embrace the fund and improve their livelihoods.
By Nashumbusha Joshua.
