Most commercial banks in Uganda have raised their loan interest rates following Bank of Uganda’s decision to raise its lending rates to them.
The central bank recently announced that it would lend money to commercial banks at an interest rate of 13%, instead of the previous11%. The banks have responded by raising their prime lending rates to between 19% and 24%.
Out of 11 commercial banks surveyed by Saturday Vision, only three had not yet raised their interest rates. The prime lending rates rose by 100 basis points to sit at an average of 20%.
The prime lending rate is the least amount of interest a commercial bank can charge a client who will not default on payments, the perfect client. In reality, however, many customers borrow at a higher rate.
A.R Kalan, the managing director of Crane Bank, said the central bank rate had influenced the upward adjustment of their prime lending rate.
“Not only has our prime lending rate risen to 23%, our interest on deposits has also risen to 14%,” he said in an interview with Saturday Vision.
Jude Kansiime, the head of marketing at the Bank of Africa, acknowledged that the current economic situation makes it harder to lend.
He said they had not adjusted their prime rates though they were monitoring the situation.
Dele Alabi, the Eco Bank managing director, said the demand for loans had not changed since most clients were still adjusting to the changes in the central bank rate.
“We shall increase our prime lending rate by 1% or 2% at the end of the month. The rise in the central bank rate is a signal for the commercial banks to increase theirs,” he said.
Wilbrod Owor, the dfcu head of consumer banking, says demand for loans from the commercial bank had remained stable and they had not changed their prime lending rate.
Adam Mugume, Bank of Uganda’s director of research, said the central bank deliberately made the move to reduce borrowing. He explained that when prices go up, some people borrow money to maintain their lifestyle.