Hakiim Wampamba
As commercial banks go on an advertising spree to lure customers, financial experts have warned that the high lending rates could undermine their competitiveness.
The experts told Nile Post that the business community is still reeling from the Covid-19 related shocks and is not in position to pay back.
Over the past couple of weeks, commercial banks have intensified advertisements using the traditional media platforms as well as the social media.
This new drive, according to banking experts, is attributed to the impact of the pandemic 19 that saw loss of customers and increase in the nonperforming loans.
Dr. Twaha Kasule, a business lecturer at Islamic University in Uganda (IUIU) said the campaign cannot be successful unless the central bank reduces the Central Bank Rate (CBR).
"The central bank must play a key role in ensuring that the tools of monetary policy like the bank rate are used, and in this case, lowering it would help to reduce the lending rates in addition to adoption of Islamic Banking," Kasule said.
Baguma Meddie, a banking expert, said the viability of the advertising move will largely depend on the products and innovativeness of the players.
"These products must be affordable and inclusive in the long run but also importantly, banks should now consider being more attractive to sectors like agriculture," Baguma said.
Government believes the financial sector will play a big role in the post Covid-19 economic recovery effort since it has demonstrated a measured degree of resilience, thanks to the central bank that cushioned it from shocks.
Uganda has 26 licensed commercial banks.
