Uganda Bankers’ Association (UBA) has announced the end to the practice of financial institutions imposing a fine on lenders who repay their loans before the stipulated period, bringing an end to the protracted argument the bankers have been engrossed in with their regulator Bank of Uganda.
The Association’s stand was announced in a press statement issued by Patricia Amito, Head Communication and Corporate Affairs Department at Uganda Bankers’ Association where she further noted that Wilbrod Owor, the Executive Director Uganda Bankers’ Association had notified Bank of Uganda of the lated decision in a letter dated 16th October 2023.
“Regulated financial institutions under their umbrella body Uganda Bankers’ Association during the monthly CEO meeting held on 13th October 2023 agreed to drop the practice of early loan repayment fees charged on outstanding loans across the membership/industry. The above changes will take effect on 1st December 2023 in conformity with the minimum 30-day notice requirement for notification of customers by Supervised Financial institutions,” read in part Amito’s media release.
The Association defended the decision stating, “The decision to halt early repayment fees is aimed at facilitating the loan market with flexible options and alternatives in constraining economic circumstances and by extension contributing to the growth of private sector credit.”
The move was welcomed by the public with Daniel Babonereirwe, CEO Banar Consults Limited during a media interview with NTV remarking, “It has been a thorn amongst members of the public explaining to people explaining to somebody that you are charging them for paying you earlier, it has never sunk well with the public and I think it is a good move by UBA to come out and show this good will.”
The development comes at the time Bank of Uganda in its 2022/2023 annual report revealed that commercial banks’ gross loans and advances increased by 4.7% from Shs18.6Trn in June 2022 to Shs19.4Trn in June 2023. this was considerably lower than the 12.2% growth posted in the previous year. nevertheless, the growth observed this year was boosted by net extensions that amounted to UGX635Bn within the period leading to June 2023.
