BOU BOSS CRITICIZES BITATURE LOAN CONDUCT AT NPA FORUM
By Mulengera Reporters
For granting curious injunctions and rulings which defaulting borrowers use to diminish or totally escape liability to pay back money borrowed from financial institutions, the Judiciary came under sharp criticisms at the 11th National Development Policy Forum that was this Thursday afternoon held at Serena Conference Center.
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The case in which embattled tycoon Patrick Bitature has endured bad publicity for borrowing up to $10m (roughly Shs36bn) from Vantage Mezzanine Fund II in 2014, which he has continued to renege paying back, came into sharp focus as development partner representatives, political leaders and top bureaucrats discussed proposals contained in a huge report authored by the National Planning Authority (NPA) in order to find ways to bring down the cost of borrowing or accessing credit for Ugandan private businesses.
The day’s theme (Reducing the Cost of Credit in Uganda: A case of Public Investment in Banking) made reflection on the Bitature saga very appropriate. And the Bank of Uganda Deputy Governor, Michael Atingi-Ego, was among those who spoke during the plenary session and he used his time to pronounce himself on many things including some of the things that make lending to Ugandan businesses such a risky venture.
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He made veiled reference to the decision by Bitature‘s lawyers to keep running to court to keep evading repayment responsibility instead of duly advising their client to pay up. The Central Bank chief said mere increasing capital and market share for the government-owned banks (as contained in the NPA proposals) won’t be enough to make credit cheaper in Uganda because there are many other factors complicating the lending business in Uganda.
He gave the example of so-called business tycoons (he didn’t mention any specifically) who don’t have the willingness to act honestly and pay back when the loan is due even when they have the money. He castigated them for obstinately running to court to seek temporary protection against foreclosure (of the mortgaged properties or assets) even when they well know that loan repayment is due. He said this explains why collateral (loan security) worth over Shs7trn continues to be tied up in endless commercial disputes in the Commercial Division of the High Court mostly between banks and defaulting borrowers.
He challenged the Judiciary to rise to the occasion and be alert about such defaulting tycoons who dubiously seek refuge in courts of law instead of paying up the money previously borrowed. He saluted the Justice Ministry for working closely with the Finance Ministry to accelerate the recruitment of more High Court judges to expedite the hearing and disposal of such commercial disputes.
The Central Bank boss’s views were to later be amplified by Wilbroad Owor, the Executive Director for Uganda Banker’s Association (UBA), which brings together 25 commercial banks and one development bank (UDB). Owor said the Judicial officers had better become serious by keenly beginning to crack the whip on such defaulting businessmen and borrowers because their mal-conduct and elusiveness when it comes to paying back borrowed money was seriously threatening Uganda’s reputation and suitability as an investment destination attractive to those involved in the lending business.
Owor said many wealthy investors who are supposed to come and invest in the Ugandan banking industry either as new entrants or strategic joint venture investors with those already existing get dinsentilized when they read about such conduct of businessmen using their connections while running to seek refuge in Court instead of paying up what is due. He said the confidence of Uganda as a good economy to invest in was getting eroded by conduct of such borrowers and judicial officers who protect them through curious judgments.
Yet Mzee Patrick Bitature isn’t the first Ugandan businessman to hide behind legal technicalities to justify non-repayment of borrowed money in billions. His great admirer, Hammis Kiggundu, equally represented by Fred Muwema (who else?) had previously tried to circumvent paying back hundreds of billions borrowed from Diamond Trust Bank on grounds their Kenyan operation, from which he borrowed some of the money, wasn’t licensed to conduct the lending business in the Ugandan market.
Just like many others who spoke at the NPA event where government promised diminishing on borrowing from local banks to avoid crowding out the private sector, Owor and Michael Atingi-Ego asserted that such conduct by lawyers, defaulting borrowers and their accomplices in the Judiciary was partly to blame as to why commercial banks are increasingly considering lending to the Ugandan private sector risky which accounts for prohibitions like high interest rates. (For comments on this story, get back to us on 0705579994 [whatsapp line], 0779411734 & 0200900416 or email us at firstname.lastname@example.org).