Commercial banks have been faulted for not doing enough to stem their increasing non-performing loan portfolios, that currently stand Shs 1.7 trillion shillings in 2017 from Shs 1.2 trillion in 2016.
Justice Geoffrey Kiryabwire, from the Court of Appeal said banks are fond of enticing people to take up loans even when, they are not certain about their ability to manage the huge loans.
He was speaking at a meeting between the Uganda Bankers’ Association at the Golden Tulip hotel in Kampala.
The non-performing loans have no doubt taken a toll on the financial institutions in the last four years, with many borrowers failing to repay their loans.
As a result, banks have confiscated their properties, presented as collateral in an effort to try and recover their money.
“If people are given loans that they haven’t planned for how can they feel the need to re pay them? I personally was once called by a bank agent proposing a loan I hadn’t even applied for “Justice Kiryabwire said.
Failure to repay these loans has resulted into more court cases, with investigations indicating that it’s the loans officers who entice members of the public to take up loans.
A report by the Uganda Banker’s Association indicates that over Shs 730 billion is held up in court cases that have taken more than one year to resolve.
Wilbrod Owor the executive director of the bankers’ association said this is not only forcing banks to sneeze but also impacting on the economy.
“As commercial banks we lend money that belongs to people, when the loan goes bad it costs us dearly and if dissolution of these cases in court takes long, it denies other people access to finances,” Owor said.
Joshua Ogwal, the executive director Asset Reconstruction Company said there are other ways a bank can recover its money without selling off the assets of the debtor.
The Uganda Law Society has to this effect set up an arbitration centre to help financial institutions and their clients to resolve such cases instead of going to court.