The Bank of Uganda (BoU) has ordered commercial banks to defer dividends and bonuses in light of the COVID-19 impact on the economy, Business Focus has exclusively learnt.
This is aimed at keeping financial institutions liquid and the economy afloat during this difficult period.
This means that shareholders are likely not to take home dividends even when over 20 banks out of 26 posted profits in 2019.
This revelation is contained in a letter to banks by Dr. Tumubweinee Twinemanzi (pictured), the Executive Director-Supervision at BoU.
In the letter, Twinemanzi reveals a number of measures aimed at not only preventing the spread of COVID-19, but also keeping financial institutions strong and sound.
He urges banks to avail incentives to customers that will drive them into using online digital platforms. Banks have also been urged to reduce on the number of workers and avoid sending physical documents to BoU; banks are advised to send scanned documents via email.
Commenting on BoU rule to defer
dividends and bonuses by commercial banks, Stephen Kaboyo, an analyst and
Managing Director at Alpha Capital Partners said as the COVID-19 decimates the
broader economy, BOU as a regulator is prescribing measures that will ensure
that financial institutions remain liquid and there is business continuity.
“The new rule to defer dividends and bonuses by the commercial banks at this
time, in my view is driven by the urgent need to conserve cash amid dwindling
revenues. On the other hand it will also deflate some pressure on the exchange
rate as most players will have no need to acquire dollars to make the cyclical
payments,” Kaboyo says.
