By Hamis Kiggundu, C.E.O/ Managing Director of Ham Enterprises (U) Limited and the author of Success and failure Based on Reason and Reality.
Uganda’s education system has passed so many qualified Accountants and Finance academicians for years, does it mean that none of these have the capacity to hold these top management positions like MDs in these foreign Banks , it’s in my opinion that all MDs to all Banks operating in Uganda should be Ugandan locals.
Uganda as a country celebrated its independence in 1962 however from the current Banking realistic prevailing circumstances, systems and structures in the country today, it’s evident that the country never gained economic independence which has limited the country’s ability to take off hence keeping the economy stagnant. This calls for Banking reforms that’s if this economy is to attain stable progress and development.
Uganda currently stands at a very critical point were majority of its youths and masses are driven by day to day social activities, drama, comedy and cheap emotional politics evident on all its media platforms yet structures, systems and policies that are meant to be the fundamental pillars are left completely unnoticed or un attended, case in point our monetary policy and current weak Banking structures.
First and foremost 95% of Banks in Uganda are foreign Banks under foreign ownership and directorship. These directors don’t even stay in Uganda but are seasonal visitors meaning they lack sight of the prevailing circumstances on the day to day economic issues of the country on ground. Decisions made at top management levels from abroad don’t reflect the actual economic demand on grounds. It’s in my opinion that all Banks operating in Uganda should have local Ugandan ownership in their shareholding with a reasonable number of Ugandan directors that seat at their board of directors with direct involvement in decision making from the top to cater for Ugandan interests as a country.
Secondly these foreign Banks employ mainly foreigners in top management jobs likes C.E.Os, MDs, and top Bank Managers which is totally unfair to Ugandans. Banks are the major link in all money transactions in the country and Ugandan should hold these top management positions in these institutions to protect the interest of the masses and in line with the realistic reasonable fact that they understand the Ugandan community better, right from cultural and social values, i.e. some things as simple as a language barriers eliminates one from all Banking services as it’s a fact that not all Ugandans are educated yet they require full access to all banking services.
In the same spirit Uganda’s education system has passed so many qualified Accountants and Finance academicians for years, does it mean that none of these have the capacity to hold these top management positions like MDs in these foreign Banks , it’s in my opinion that all MDs to all Banks operating in Uganda should be Ugandan locals.
Thirdly these foreign Banks are very discriminating in their day to day operations, they easily extend loans to foreigners compared to Ugandan. A loan a foreigner applies for and receives in two weeks would take a Ugandan a full year with a lot of hardship, and securities requirements.
The foreign Banks are equally discriminative when giving interest rates on loans where foreigners receive lower interest rates i.e. like 16% on Ugx loans while Ugandans receive interests in the range of 23% and above on the same loans. This is mainly in Banks like Diamond Trust Bank. How do you expect a Ugandan to fairly compete with the foreigners economically on equal footing while trading in the same businesses and same market.
The foreign Banks discriminate against we local Ugandans even when it comes to the amounts of money disbursed or exposed at individual or company levels. Foreign companies are given first priority and larger amounts with much easier terms under the disguise of corporate governance, while Ugandans and their companies are limited on exposure. They limit Ugandans to smaller loans for limited investment like small business, arcades and the likes. This is evident on loan balance books of the majority of these Banks. Please check how many Ugandans have loans of 10,000,000 USD and above on the balance books of the majority of these foreign Banks.
This has equally frustrated development of Uganda as a country were locals can’t invest in developmental projects that requires huge substantial long term capital investment like Agro Processing and value addition plants that would collectively improve on incomes of Ugandans, promote import substitution, help us penetrate the regional and international markets and help us widen the tax base as a country in the long run.
These Banks offer longer term loans to foreign companies as compared to local companies, local business Men and women. It’s my humble opinion that I propose the government should implement total reforms to the Banking Regulations in this regard.
The foreign Bank come to Uganda as investors yet with very limited capital that can’t see this country take off, for as long as they deposit the Ugx 25 Billion requirement with Bank of Uganda , use Ugx 5-10 billion to establish structures with a maximum total of Ugx 40 – 50 billion spent, then start advertising lowering Ugandans to bring deposits and savings with the Bank which makes the core base of their operational capital meaning these Banks operate within our limited capital yet disguising as foreign investors which I find absolutely economically exploitative. They receive our money in one hand from Ugandans as a deposit or savings and release it through the other hand as a loan at very high interest rates with zero capital input yet they additionally easily extend loans to foreigners as compared to Ugandans.
Despite all the above , these foreign Banks at the end of every year repatriate all the profits they make in our lovely motherland Uganda leaving this economy almost completely dry, How do you expect this economy to take off then? They repatriate the profits made hiding under outdated laws in comparison to the prevailing current economic circumstances, which provide that they can’t invest the money in Uganda for fear to out compete the people they Borrow/lend yet they can reinvest these profits to recapitalize their Banks raising their single borrowers limits to enable Ugandans have access to more working capital that will enable us invest in developmental projects that can see this country develop.
Insufficient capital in these Banks and inability to fully substantially finance projects has greatly affected Ugandan businesses, most Ugandan businessmen and women have learnt this the hard way i.e a company comes to a Bank with a business investment plan of 10m USD having already invested 50% as equity, the Bank without disclosing its finance capacity and limits since its interested in getting business starts financing the project in partial loan disbursement to a tune of 2m USD, half way the project with a balance requirement of 3m USD to finish the project and have it productive to receive returns the Bank discloses to the customer that their company has reached the single borrower limit of 2m USD . It’s at this point in time that customers start defaulting and end up losing their properties.
That’s why you find a company with a total obligation of 5m USD or merely Ugx 10bn spread in over five different Banks. These scattered loans become very hard to manage hence the government should request these small Banks to either recapitalize or these small Banks should be forced to merge and form a single financially stable Banking institution with the capacity to meet the current demands of our economy towards substantial development.
The Banks can be directed to equally invest in specified developmental projects and sectors of the economy that requires long term investment capital with long term return on investment like regional integrated Agro Processing plants, oil and gas or exploitation of untapped Ugandan resources that can see our lovely motherland Uganda take off. Why plead with foreign investors to come help us explore our untapped resources yet we have banks that repatriate billions of money every year from this economy in the interest of economic exploitation. It’s in my personal opinion that all this calls for total banking reforms.
BANKS AND UGANDAN LAWS.
In regards to all the above exploitation of our economy by foreign banks. These banks have managed to use Uganda’s legal system and framework to their advantage which stands as totally unfair and unjust to all we ordinary Ugandans.
It’s common knowledge that for one to acquire a loan from any financial institution, one should financially be sound with at least sufficient security to acquire a loan from the bank. Meaning by the time one goes to the bank for additional financial support they already own some finances i.e. maybe one has empty land and requires construction capital or one already started construction and requires completion capital, so when a bank comes on board they are merely co-investors in such a project.
It’s very disheartening that it’s only in Uganda where the Banks come on board with minimal percentage of investment as loans for a 5year term loan and three years down the road, a client defaults on only 3 monthly installments and the bank takes the entire property including initial investments, the money paid as installment for the 3 years and at times other un mortgaged properties like people’s homes, going as far as arrests of their customers in the disguise of personal guarantees which is totally unfair.
Once a client runs to courts of law asking for justice on something as small as an account reconciliations for fairness in the recovery process. Banks invoke regulation 13 of the 2012 Mortgage Regulations that requires any person with interests to raise legal proceedings against a bank to first deposit 30% of whatever monies involved. This is totally unfair to Ugandans as it stands repugnant and inconsistent with article 28 of the Constitution which provides for a right of fair hearing to all Ugandans. How can a victim that has run to courts of law seeking justice be subject to this injustice of having to first make payment before they can be heard by courts of law yet this is practiced by many Banks and so many Ugandans have lost their properties as a result of this injustice all at the cost of protecting foreigners. This has greatly hindered the capacity of Ugandans to economically prosperity at individual levels, improve our society or even develop the country at large. This injustice should be scrapped off the Ugandan legal system.
Case in point, the Mortgage Act was enacted in 2010 yet Regulation 13 that provides for payment of 30% deposits was literally smuggled into the Uganda legal framework way later in 2012 under the 2012 Regulations.
This was a copy cut of the 30% deposit requirement under the income tax law which required taxpayers to pay a 30% deposit of a tax assessment before they could proceed to challenge such assessment in courts of law.
I authoritatively bring it to your attention that the Constitutional court of recent under Constitutional Petition No. 3/2009 outlawed this unfair legal practice in Fuelex (U) Ltd Vs Uganda Revenue Authority under the income tax laws.
It’s not a fact that all Ugandans businessmen, women and local companies are all poor business managers for most of their businesses to collapse but rather it’s the poor unfair Banking structures and systems, failure of Bank of Uganda to regulate the Banking sector, lack of patriotism of Ugandans, Supplemented by a poor legal framework of Banking regulations that don’t protect local businesses facilitated by a weak judiciary structure that has finished off these local businesses in courts of law yet protecting the foreign Banks that repatriate all the capital out of the Ugandan economy on an annual basis.
I humbly call upon the Government, Parliament, and the Judiciary to look into these findings that seek implementation of these urgent Banking reforms in regards to all the sectors of the country to protect Ugandans and give our motherland an economic head start to take off and realize its economic full potential. These funny laws used by the Banks as a shield should equally be scrapped off our legal system to ensure independence of the Judiciary and uphold the Constitutional rights and freedom of all Ugandans.
I humbly call and seek for Banking reforms to this regard.
Mr. Kiggundu Hamis is the C.E.O/ Managing Director of Ham Group of Companies, popularly trading as Ham Enterprises (U) Limited, a general conglomerate in Uganda directly employing about 2900 people.
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