Private sector credit dropped 0.7 percent in January 2024

KAMPALA, March 19, 2024 – The stock of outstanding private sector credit in Uganda reduced by 0.7 percent to Shs 21.54 trillion  in January 2024, from Shs 21.70trn in December,2023, mainly explained by an increase in loan repayments despite an increase in new credit approved over the same period, says the Performance of the Economy Monthly Report released by the Finance ministry.

According to the report, the stock of shilling denominated credit reduced to Shs 15.17trn in January 2024 from Shs 15.27trn the previous month, while the stock of forex denominated credit in shilling equivalent reduced by 0.9 percent to Shs. 6.38trn from Shs 6.44trn over the same period, despite the reduction in the weighted average lending rate for forex denominated Dec 2023 credit. According to the report, this is partly explained by the shilling depreciation over that period.

Credit extensions

Meanwhile, the report says the value of credit in the country approved by the banks increased to Shs 1.35trn in January 2024 from Shs 883.1bln in December 2023 following the sustained improvement in economic activity and a continued decline in the ratio of non-performing loans to total gross loans from 5.3 percent in September 2023 to 4.6 percent in December 2023.

The rate of loan approval also significantly improved to 75. Percent in January 2024 from 56.5 percent in December 2023.

“As was the case in December 2023, personal loans and household loans continued to dominate the largest share of credit approved in January 2024 at 27 percent of total, followed by manufacturing at 18.3 percent, building, construction and real estate at 15.2 percent and trade at 14.5 percent,” says the report.

The share approved towards the manufacturing sector, which is a key driver of growth, significantly increased from 3.9 percent in December 2023 to 18.3 percent in January 2024, says the report.

Interest rates up

Commercial banks’ shilling denominated lending rates in the country increased to a weighted average of 17.32 percent in January 2024 from 16.70 percent in December 2023, partly explained by the increase in inflationary pressures over that period.

https://thecooperator.news/private-sector-credit-grew-1-6-percent-in-september-2023-says-new-report/

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