The Uganda Bankers Association, the umbrella body for all banks in Uganda has it will join Diamond Trust Bank(DTB) against the Commercial Court judgment that declared illegal, the loan that businessman Hamis Kiggundu of Ham Enterprises from the bank.
Justice Henry Peter Adonyo on Wednesday ruled that DTB Kenya illegally carried out business in Uganda by lending to Hamis Kiggundu without obtaining a licence from Bank of Uganda as required by law and consequently, directed the bank to return Ham Enterprises’ mortgaged property after canceling the loan mortgages.
However, in a statement released shortly after the judgment, the Uganda Bankers’ Association said the outcome of the court case sent shockwaves to everyone in the banking sector and international partners agencies plus lenders.
“The message this judgment is sending to other borrowers with foul intention who can now anchor their default on this judgment that declared syndication illegal. The overall impact of the judgment is to the economy,” the Uganda Bankers’ Association said.
In their defence, DTB said their Kenya counterparts (DTB Kenya) had appointed DTB Uganda which is licenced to carry out business in Uganda to act as their agent and thus they operated legally to collect funds for repayment of the said credit facility from Ham Enterprises.
In his judgment, Justice Adonyo ruled that such action of appointing DTB Uganda to act as an agent of DTB Kenya ought to have been done legally and the former gets licence from the Central Bank to do the job.
“These actions, in my view, are by their very nature the carrying out of financial institution business which are regulated under section 4 (1) of the Financial Institutions Act 2 of 2004 and for such actions requires valid licenses granted for that purpose by the Central Bank of Uganda,” he said.
However, according to the Uganda Bankers’ Association, they will join Diamond Trust Bank as an interested party in appealing against the judgment that they said will have a great effect on the banking sector in Uganda.
“We will join Diamond Trust Bank to file for a stay of execution of the orders of the Hon. Justice but to also call upon the Central Bank of Uganda to pronounce itself on the matter.”
In a statement, UBA also rallied all government agencies facilitating business like the Uganda Revenue Authority, Uganda Investment Authority, the Ministry of Finance and the Judiciary, as well as private-sector agencies to join the case.
"Join us in addressing the implications of the judgment and assist in avoiding the adverse effects" of the judgment on the economy and the country.”