Common practice and belief in Uganda’s business sector is that it’s difficult to save to start any meaningful business. And so majority rush to the banks and other financial institutions to borrow to start or expand their businesses
Unfortunately, this comes with a price, a price that many are never told about or even made to understand at the time they sign to get the loans. And as soon as they put this money in their business, they also start servicing bank loans since no grace period is ever given.
According to the city trader’s figures of 2017, almost 70percent of arcades exchanged ownership over loan complications.
The Kampala Capital City Traders Association Spokesperson Isaa Ssekito notes that such loss of business empires and businesses is not a rare trend as most traders are not able to own property consistently for over fifteen years. Ssekito highlights numerous economic and social impacts of borrowing on the community.
“Whenever you go and you see bank property or property for sale, somebody is not dead, it’s just another person becoming a tenant and these are very common in all places and it’s a result of borrowing. When you go to the arcades and find spaces for rent, then either somebody has borrowed and run away because of a loan. When you see couples separating, and the homes breaking down either the woman or man has borrowed and the family has disintegrated,” Ssekito said.
The state of business frustration and loss of properties is partially blamed on unfair bank terms such as excessive high interest rates and banks, though not explicitly stated, would prefer taking over particular properties at whichever chance than have the loans paid back.
“There are people whose collaterals have been forfeited because there are people in the commercial banks who connive with buyers to take the property and even when you go to bank of Uganda as the supervisor you can’t redeem your property.”
Ssekito who deems borrowing a necessary evil says traders on the other hand are also to blame for loan mismanagement and poor saving habits. He says many borrow out of excitement and with no purpose whatsoever.
“But also traders become very excited, the effective demand of a person who has borrowed 100million shillings becomes a second wife because you can afford a second home, a land cruiser worth seventy million because you have a 100 million on account you think you can drive a very long car.”
The bank of Uganda has been blamed too for letting commercial banks run business as they wish with no checks on interest rates and worse with liberty to expose their clients to well-known illegalities without any repercussion.
“The bank of Uganda is completely helpless on the customers who are crying foul even on the simplest things that the bank of Uganda could undertake.”
It’s therefore imperative for traders to understand the dos and don’ts of borrowing before indulging in the same.