Political and economic conflicts in the developed world are increasingly becoming significant to emerging and less developed countries like Uganda, as the world economies become more interconnected, according to experts. This is one of the main threats to Uganda’s financial sector and calls for more caution from the financial institutions and strict regulation by the government through the Bank of Uganda.
Andrew Mashanda, the Chief Executive of Stanbic Holdings Uganda Ltd, says it is no longer prudent for the rest of the world to ignore geopolitical developments like the Russia/Ukraine war, the US/China trade wars, the China/Taiwan conflict, or the economic alliance between China, Saudi Arabia, and Russia.
According to him, Uganda’s economy is still suffering from the effects of global occurrences, giving the example of how fast the spillover effect from the Ukraine war was on Uganda.
When the conflict broke out, the global supply chain was immediately disrupted and global trade with Russia and Ukraine and surrounding countries became hard, pushing up prices of petroleum, cooking oil, and grain worldwide. The conflict also reversed recovery trends in the financial sector as countries started raising interest rates to tame inflation back home.
The economic situation in the developed world meant that they had to maintain the restrictions on financial outflows which had been introduced due to the COVID-19 pandemic. The events of the last three years have also made reliance on offshore investors unsustainable as many have relocated back to their countries where they feel it is safer to invest.
Speaking at the release of the 2022 financial results for Stanbic Bank, Mashanda however, said the operating environment had improved over the year compared to the previous two years, enabling them to pay full dividends to shareholders. The industry is facing new and emerging risks including cyber-related risks like theft of funds and money laundering, as businesses and economies generally integrate digital technology in all operations.
He said this is a challenge to banks and other financial institutions to focus more on innovation and keep ahead of the criminals, adding that the rapid growth of the real estate sector is increasing the risk of money laundering.
The Chief Executive Officer at Stanbic, Anne Juuko admitted the threat of cybercrime to the industry in the wake of the many cases that have been reported involving loss of money at several banks.
Juuko said the banking industry was developing mechanisms to make sure they stay ahead of the perpetrators. The Uganda Banker’s Association Executive Director, Wilbroad Owor said earlier that the banking industry had come up with a joint strategy with other sectors like security, telecommunications, and intelligence to tackle the issue jointly.
The directors will recommend to shareholders at the next annual general meeting, a final dividend of 3.61 shillings per share totaling 185 billion shillings, in addition to the 50 billion that was paid last year. “As a result of the economic recovery of our customers, we saw a 9.8 percent growth in demand for new credit in 2022 with the volume of disbursed loans increasing to 77,819 worth 4 trillion shillings, from 63,639 approved applications that were worth 3.7 trillion disbursed in 2021,” said Juuko.
The Bank also registered an increase in SACCOs that accessed credit through its multi-stakeholder Economic Enterprise Restart Fund (EERF) to the tune of 40 billion shillings at a 10 percent per annum interest for those in the agriculture sector. In terms of lending, Stanbic reported that the agriculture sector remained in the top five recipient sectors of the bank’s credit in 2022, accounting for 437 billion shillings, a position they relate with the country’s key growth drivers.
The other top recipients of Stanbic Bank’s lending over the year were households (retail customers) accounting for 1.04 trillion, trade 663 billion, real estate 573 billion shillings, while transport and telecommunications accounted for 417 billion. Juuko says more than one-third of their customers are now conducting their transactions at agencies, making operations cheaper and more accessible.
-URN
