Value of loan approvals fell to Shs2.26 trillion in the quarter to August 2021 from Shs2.36 tn in the quarter to May 2021 as lenders exerted caution driven by lockdown measures.
This is contained in the Bank of Uganda (BoU) Monetary Policy Report for October 202.
The report adds that lending interest rates fell to to an average of 17.2% in quarter to August 2021 from 18.80% in the quarter to
May 2021 in line with the accommodative monetary policy stance.
“M-o-M (Month on Month) however, lending rates increased in August 2021 to 18.3% from 16.3% in the previous month driven by loan extensions to the Trade, and Household sectors,” the report reads, adding that PSC (Private Sector Credit) growth picked momentum in the quarter to August 2021, partly due to the easing of lockdown in July 2021, accommodative monetary policy stance and credit relief measures.
“In the quarter to August 2021, PSC grew by 9.44% compared to 7.37% in the quarter to May 2021. Less net capitalised interest, PSC grew by 9.7% in the quarter to August 2021 from 7.3% in the quarter to May 2021 while capitalized interest fell to a total Shs181.4 bn from Shs298.0 bn over the same period,” the report says.
In the near term, the report says, the continued uncertainty due to the lingering effects of COVID-19 on economic activity could continue to moderate momentum of PSC growth.
According to the report, value of loan applications fell to Shs3.86 trillion in the quarter to August 2021 from Shs5.41 tn in the quarter to May 2021, reflecting reduced demand due to the slow pace of economic recovery.
“Wider uptake of vaccines and opening up of some sectors of the economy may increase business activity in turn leading to increased supply and demand for credit in the near-term,” the report says.
It adds that Sectoral disaggregation shows that loans to the Personal & Household, Agriculture, Manufacturing, Trade and Building-Mortgage-Construction & Real Estate sectors continued to be the main drivers of PSC growth.
“Lending to the Business services sector continued on a downward trend,” BoU says.