From February to April 2024, Ugandan businesses and individuals sought loans totaling Shs5.1 trillion from financial institutions, but only Shs3.4 trillion was approved during this period, according to the Bank of Uganda’s State of Economy Report for June 2024.
The report, released on Wednesday, provides an overview of economic developments up to May 2024 and focuses on macroeconomic trends and policies. It highlighted a decrease in both gross credit extensions and recoveries over the three months ending April 2024. The reduction in credit extensions was more pronounced than the decline in recoveries, as banks reduced the renewal of credit lines for borrowers. Credit demand dropped to Shs5.1 trillion from Shs5.3 trillion in the previous three months, while credit supply remained steady at Shs3.4 trillion.
To mitigate the effects of this cautious lending approach, several government intervention programs, such as the Parish Development Model (PDM) and Emyooga, along with alternative financing sources like fintech, have supplemented private sector credit.
The Central Bank also noted that credit growth has been limited across key economic sectors, particularly agriculture, trade, transport, and communications. This slowdown is attributed to lower advances in fishing and forestry within the agriculture sector and reduced credit to wholesale trade and imports in the trade sector.
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