Annet Mulindwa Nakawunde, the Finance Trust Bank Managing Director/FTB Photo
Finance Trust Bank Limited has transitioned from a Tier I Commercial Bank License to a Tier II Credit Institution License effective 01 April 2026 after failing to meet the Shs150bn minimum capital requirement, Business Focus reports.
In a statement dated 29 January 2026, Bank of Uganda says Finance Trust Bank has been granted a transition period of three (3) months from 01 January 2026 to 31 March 2026, during which it will make adequate arrangements to phase out products and processes that require a Tier I Commercial Bank License.
“This is intended to ensure a smooth service transition for its customers and to mitigate any disruption to financial sector stability,” Kenneth Egesa, the Director Communications at BoU said in a statement.
He added: “The change of status to a credit institution follows a decision by Finance Trust Bank’s Board of Directors, to adopt a strategic shift and reposition the institution to serve its core customer base better. Finance Trust Bank is adequately capitalized and meets the minimum capital requirements for a Tier II License.”
Bank of Uganda further reassured the public that it remains committed to ensuring the stability of the financial system.
In Uganda, Tier 1 banks are commercial banks authorized to offer full banking services, including checking accounts and foreign exchange, while Tier 2 credit institutions are non-bank financial institutions that focus on savings, time deposits, and lending with lower capital requirements than commercial banks (Tier I).
It should be noted that a few years ago, the Bank of Uganda increased the paid-up capital of commercial banks to Shs150bn, up from Shs25bn. Banks were meant to fulfill this requirement by June 2024.
Furthermore, the paid-up capital for tier II credit institutions was increased from Shs1b to Shs25b. For microfinance deposit taking institutions (MDIs), capital requirements were increased from Shs500m to Shs10bn.
Finance Trust Bank was granted a Tier License in November 2013, but its performance hasn’t been impressive.
In a market of 25 banks, Finance Trust Bank emerged as number 21 among Uganda’s most profitable banks in 2024.
Headed by Annet Mulindwa Nakawunde as Managing Director, Finance Trust Bank made a profit of Shs10.35bn in 2024, up from Shs3.73bn a year earlier. This gave it a paltry market share of 0.63% under the profit category.
Business Focus analysis further shows that Finance Trust Bank has one of the smallest assets in the market. In asset value, FTB emerged as number 18 in 2024. Its assets stood at Shs551.04bn in 2024, up from Shs465.46bn in 2023. This represents a market share of 1.04% under this category. It’s important to note that the total banking industry assets stood at Shs52.98 trillion in 2024.
In terms of loans, FTB advanced Shs356.33bn to customers in 2024, up from Shs291.40bn in 2023, while its customer deposits were recorded at Shs340.74bn from Shs276.72bn in 2023. This represents a market share of 1.66% and 0.97% under loans and customer deposits respectively.
I’s worth noting that Finance Trust Bank isn’t the first to downgrade to a tier II Credit Institution. In 2024, the Bank of Uganda authorized ABC Capital Bank (U) Ltd, Opportunity Bank and Guaranty Trust Bank (U) Ltd to transition from a Tier I Commercial Bank License to a Tier II Credit Institution License effective July 1, 2024.
This is after they failed to meet the Shs150bn minimum capital requirement.
Impact of increased Paid-Up Capital on Commercial Banks
Traditionally, the core function of any commercial bank is the extension of loans and the larger proportion of banks’ assets is formed by loans. This function is well executed only when banks have adequate levels of capital.
In an earlier interview with Business Focus, Hassan Kitenda, an equity and fixed income analyst, said the increase in capital requirements will force banks to revisit their internal operation strategies in terms of strong corporate governance, risk assessment methods, and credit evaluation procedures hence reducing the bank’s credit risk that mainly affects Ugandan banks.
He noted that banks with more capital are financially able to explore profitable projects, expand operations and take on well estimated levels of risks, while banks with limited capital refrain from investing large sums of money in lending activities, which is risky.
“It can be argued that well-capitalized banks react less to output shocks as compared to less-capitalized banks because they hold excess capital and need a little adjustment in lending during economic downfalls and in addition their profits are less sensitive to business cycles,” Kitenda said.
He explained that an increase in capitalisation will force small banks to merge, downgrade or get acquired and this will contribute to an increase in the number of products offered, integrated technologies, reduction of operational risks, increased market share which will improve stability of the banking industry.
He explained that as commercial banks meet minimum capital requirements, they can cut their total lending.
“It has been evidenced that banks trying to satisfy more stringent capital requirements reduce their supply of credit and this leads to a slowdown in economic growth (in the short run),” he said, adding that more potential competitors maybe prevented from forming due to the high capital requirements.
“Higher capital requirements might protect existing banks by giving them more market power to raise loan rates, account fees, and other costs for their customers,” he said.
