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BOU MAKES IT HARD TO OPERATE OR START A COMMERCIAL BANK IN UGANDA

By Joel Mugabi

Uganda’s Central Bank has announced new conditions for those who wish to start or continue operating commercial banks, credit institutions and Micro Deposit Taking Institutions (MDIs) in the country.

Bank of Uganda (BoU) Executive Director for Supervision Dr Tumubweinee Twinemanzi communicated the new changes to all Chief Executives of Commercial Banks, Credit Institutions and MDIs in a circular dated August 20, 2021.

In the circular, copied to the BoU Director for Commercial Banking, Director Non-Banking Financial Institutions Department (NBFI) and the Director Financial Stability, Dr Twinemanzi invited CEOs to a meeting to discuss the new changes. The consultative meeting, which will discuss the proposed increase in paid up capital requirement for all financial institutions, is slated to take place this Thursday, August 26, 2021 at 11am via Microsoft Teams.

Ahead of the meeting, BoU’s Twinemanzi made it clear to financial institutions that the central bank is planning to increase their the minimum paid-up capital requirements in accordance with Section 26(5) of the Financial Institutions Act 2004 and Section 15 (3) of the Micro Deposit Taking Institutions Act 2003.

The Supervision Executive Director noted that the current legal framework puts the paid-up capital for Commercial Banks at Shs25bn and was last updated in 2010, the one for Credit Institutions is at Shs1bn and was last revised in 2004 while the one for MDIs is at Shs500m and was last updated in 2003.

“Consequently, the increase in paid-up capital is long overdue and is intended to match the dynamism in the economy, incentivize shareholder commitment, enable institutions to withstand shocks and to converge with regional peers among whom Uganda effectively has the lowest paid-up capital,” explained Dr Twinemanzi.

Consequently, BoU has proposed that the paid up capital requirement for commercial banks be increased from Shs25bn to Shs150bn, the one for Credit Institutions from Shs1bn to Shs25bn and the one for MDIs from Shs500m to Shs10bn.(For comments on this story, call, text or whatsapp us on 0705579994, 0779411734, 0200900416 or email us at mulengera2040@gmail.com).

 

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