By Silvia Nyambura
The trade and commerce and the building and construction sectors continue to account for the largest share of Non-Performing Loans (NPL). The two sectors recorded 20.2% and 18.6% of total NPLs in the banking sector respectively. This is according to the 2014 Bank of Uganda (BOU) annual supervision report.
In addition, the building and construction sector recorded the highest growth in loans with an increase of 36.9% over the period under survey. This represents a shift from the previous year when personal and household loans dominated NPLs.
Overall, the volume of NPLs declined from Ushs 465.8 billion in December 2013 to Ushs 389.6 billion in December 2014. However, there was also significant write off of loans amounting to Ushs 317.9 billion in during the year which would explain the decrease.
“It is important to note that whereas credit risks eased during the year with overall sector vulnerability being low, NPLs still posed a challenge to some banks during 2014. The transport and communication and the agriculture sector held the highest sectoral NPL ratios for the period under review with ratios of 6.9% and 5.6% respectively. Bank of Uganda continues to monitor the trends in sectoral credit risk and to conduct quarterly aggregate stress tests to calibrate the likelihood and impact of these risks.
