Tumubweine Twinemanzi, the Executive Director–Supervision at BoU
The collapse of Afriland First Bank Uganda Limited will have little impact on Uganda’s banking sector and the economy at large, Bank of Uganda (BoU) has said.
Asked about the impact of Afriland First Bank exit on the banking sector and the economy at large, Tumubweine Twinemanzi, the Executive Director-Supervision at BoU noted that “by the time we gave them the approval to proceed (voluntarily exit), there are a number of things we have done. We have determined it’s solvent and conducted regulatory impact assessment of this exit. The impact is little to minimal.”
According to Twinemanzi, Afriland First Bank has the capacity to manage conditions for the exit.
For instance, Twinemanzi said the bank has an asset base of Shs32 billion, liabilities of Shs11.3 billion, Shs8 billion in loans and Shs958 million in customer deposits.
“Its available assets are more than enough to pay off its liabilities. Otherwise,Bank of Uganda would not have allowed them into voluntary insolvency,” Twinemanzi said.
Twinemanzi justified Afriland’s exit further that “in any case, where you have a law that allows entry, you must also have a law that allows exit. So, this is the normal cause of business.”
“They got their license on September 12, 2019, we locked down the economy (ours was a hard lockdown) in March 2020. They began operation in December 2020. Then we had a second lockdown. They have the right to reenter the same market,” Twinemanzi said.
Michael Atingi-Ego, the Deputy Governor at BoU on Thursday told the media that the Central Bank on on May25, 2022 exercised its powers under Section 98 (Part1) of the Financial Institutions Act, 2004 (as amended) and approved a request from Afriland First Bank (U) Ltd to apply to the High Court for voluntary liquidation.
“Afriland First Bank (U) Ltd’s decision for voluntary liquidation was an outcome of the strategic business review by the shareholders, Afriland First Group,” Atingi-Ego said.
He added: “Bank of Uganda hereby informs the public that Afriland First Bank (U) Ltd is a solvent financial institution. Therefore, all depositors and other verified creditors shall be paid in full. All depositors of Afriland First Bank (U) Ltd are encouraged to withdraw their deposits from Afriland First Bank (U) Ltd premises. All other verified creditors shall be paid in full by the liquidator that has been appointed by the shareholders of Afriland First Bank (U) Ltd.”
Afriland First Bank Uganda is a subsidiary of Cameroon based Afriland First Bank, a full-service bank, with subsidiaries in the Democratic Republic of the Congo, Equatorial Guinea, Guinea, Liberia, South Sudan, São Tomé and Príncipe and Zambia. The bank was founded in Yaoundé in 1987 under the name of Caisse Commune d’Epargne et d’Investissement. It is the largest financial services group in Cameroon.
Headed by Aboubaker Mayake as Managing Director, Afriland First Bank (U) Ltd published its financial statements for the first time this year.
According to the bank’s audited financial results for the year ended 31st December 2021, Afriland First Bank (U) Ltd was an undercapitalized financial institution.
Whereas BoU’s minimum capital requirement is Shs25bn, Afriland First Bank’s core capital stood at Shs19bn in 2021, down from Shs26.75bn in 2020.
According to the results obtained by Business Focus, Afriland First Bank made a loss of Shs2.67bn in 2021, up Shs1.84bn loss recorded a year earlier.
Its customer deposits were the lowest in the market, standing at Shs176m in 2021, down from Shs1.37bn.
The bank’s assets stood at Shs33.69bn in 2021, down from Shs34.28bn recorded a year earlier.
Afriland First Bank’s collapse follows the Orient Bank Uganda takeover by I&M Group Plc.The bank has since rebranded to I&M Bank (Uganda) Limited. I&M Group Plc became the major shareholder in Orient Bank, with a 90 percent stake, in April 2021.
In recent years, smaller banks have either been swallowed by bigger banks or merged. For example, Commercial Bank of Africa merged with NC Bank to form NCBA. This development also follows the controversial collapse of Crane Bank.
