Africa-Press – Uganda. Loan extensions to the private sector drastically declined in the three months to March, according to the Bank of Uganda April Performance of the Economy Report.
The report, which highlights performance of a number of economic fundamentals, indicates that both value and approvals fell despite an increase in applications.
For instance, between January and March, the report indicates, banks extended credit worth Shs531.9b to the private sector but declined to approve Shs468.1b worth of applications.
“Total net extensions decreased in the three months to March to Shs531.9b from Shs1 trillion in the three months to December 2022 on account of a decline in loan extensions,” the report reads in part.
Similarly, during the quarter, approval rates for credit declined to 60.44 percent from 63.59 percent.
However, the decrease came amid notable growth in the number of loan applications, which during the period, grew to 1.09 million from 0.97 million requests in the three months to December 2022.
The reduction saw private sector credit growth contract to 9.8 percent from 10.2 percent in the quarter to December 2022, driven by declining lending in foreign currency.
This was largely due to an increase in lending rates, which, the report says, somehow negatively affected credit demand and valuation changes.
The report further indicates that interest rates for both shilling and foreign currency loans surged upwards dampening demand and valuation.
Growth in credit remained sluggish across major sectors, except for personal loans and manufacturing sectors.
Agriculture, which has recorded contractions in credit since November 2022, remained subdued, while building, mortgage, construction and business services sectors experienced major credit growth slow down.
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