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BoU, DPF to start paying EFC Uganda depositors next week

KAMPALA, January 24, 2024 - Depositors of EFC Uganda are to be paid by the Bank of Uganda [BoU] and the Deposit Protection Fund of Uganda [DPF] after the lender had its licence revoked on January 19, 2024, due to undercapitalisation and poor governance.

Following the liquidation of the microfinance company, in a notice to the public, BoU and DPF said they would its depositors in accordance with Sections 111A and 111C [5] of the Financial Institutions Act 2004 as amended.

"The Deposit Protection Fund will pay the protected deposits. BoU as a statutory liquidator of EFC Uganda Limited, will pay the unprotected deposits. BoU and DPF have established mechanisms to ensure that depositors receive their funds as soon as possible,” said the notice issued on January 23, 2024.

According to the notice, depositors who have protected deposits of up to Shs 100,000 will be paid using mobile money with effect from January 29, 2024, after verification of their National Identification Number [NIN] and their mobile phone numbers.

On the other hand, all other depositors with balances of up to Shs 10 million will be paid effective February 5, 2024, through a bank to be communicated.

Meanwhile, BoU and DPF say depositors with more than Shs 10mln will be informed of the arrangements for paying their deposits within 14 days from the date of the notice signed by BoU’s Deputy Governor Michael Atingi-Ego and DPF’s CEO Dr. Julia Clare Olima Oyet.

Before its liquidation, EFC Uganda was offering loans to schools, women entrepreneurs, and businesses. It served the underserved micro, small and medium entrepreneurs [MSMEs] market segment.

Business

According to EFC Uganda’s annual report 2021, its balance sheet grew from Shs 87.2 billion in 2020 to Shs 101.4bln in 2021 reflecting a 16.29 percent growth mainly on account of growth in customer deposits and a capital injection in August 2021. Earning assets made up 87.01 percent of total assets at end of 2021.

According to the report, customer deposits grew by 95.8 percent in 2021 from Shs 40bln in 2020 to Shs 78.3bln at close of 2021. “Growth in customer deposits was attributed to growth in Term deposits dominated by institutional depositors.”

Meanwhile, the institution’s net loans and advances went down year on year by 26.4 percent to close 2021 with a net portfolio of Shs 42.6bln from Shs 57.9bln at close of 2020, the decline being attributed to the effects of the Covid-19 pandemic on the businesses of clients. “The lockdown of the economy experienced in 2021 as well as travel restrictions instituted by our trading partner countries significantly affected customers’ businesses especially our niche market, the report says.

Some of the management team that served EFC Uganda (Courtesy photo).

Total Equity for the institution went down year on year by 2.8 percent to close 2021 with a total equity of Shs 12.05bln from Shs 12.40bln at close of 2020. The dip in equity levels is a result of the 2021 net loss, ensuing from a declining portfolio as well as deterioration in portfolio quality.

The Financial Institutions Act 2004 [as amended] required credit institutions to maintain capital of Shs 20bln by 31 December 31, 2022. The capital threshold above will further be increased to Shs 25bln by June 30, 2024.

In November 2022, EFC Uganda Ltd won Platinum under the category of “Best Microfinance Institution in East Africa” at the East African Brand Awards. Some of the key tenets that were considered by the organisers of the awards included; Economic sustainability, operational effectiveness and technology adoption, progressive leadership and culture, social and community contribution, commitment, and perseverance.

In July 2022, EFC Uganda won gold under the category of “Best Microfinance Institution” in Uganda at the 4th edition of the Consumer Choice Awards 2022. The Consumer Choice Awards is an annual event aimed at recognising business excellence by conducting comprehensive and objective independent market research surveys, to determine brand reputation, customer satisfaction, and business excellence for the quality of services rendered to the populace.

https://thecooperator.news/banks-moving-towards-meeting-new-paid-up-capital-requirement-says-bou/

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