Weak Shilling: BoU Says Companies Likely To Default On Loans

Ugandan companies are likely to default on their bank loans in the third quarter of 2018 due to a depreciating shilling against the U.S. dollar, a new report by the country’s central bank showed Wednesday.

The report by the Bank of Uganda showed that default will mainly occur in enterprises that borrowed in foreign currencies.

The report also indicated that while commercial banks show an easing for average loans, collateral requirements and prime borrowers, conditions were tightened in terms of margin on riskier loans, size of loans, maturity and non-interest charges.

The outlook shows that commercial banks anticipate an overall increase in demand for credit.

“The increase in demand is expected to be largely influenced by expanded business opportunities resulting from the start of a new financial year and expected investments in oil and gas,” the central bank report said.

The report showed that in the second quarter of 2018, credit standards on loans to enterprises were eased at a slower pace than the previous quarter.

It also showed that in the third quarter, banks will expect to further ease overall credit standards for small and medium-sized enterprises while tightening standards for large enterprises.

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