Banking & Financial ServicesThe Big Story

Uganda’s Banking Paradox: Strong, Profitable, and Liquid but Failing to Power Productive Growth Uganda’s banks present a picture of financial health: well-capitalized, liquid, profitable, and increasingly resilient. Returns on equity remain strong, bad loans are shrinking, and liquidity buffers are among the highest in the region. Yet beneath this strength lies a paradox. Credit growth is weak, and much of it flows to personal consumption and real estate, not to the productive engines of agriculture and manufacturing. The result is a banking system that looks stable but risks starving the economy of the capital it needs for real transformation. Strong banks, yes, but is Uganda getting the growth dividend?

Whereas banks present a picture of profitability and highly liquid, credit expansion remains weak, and the little lending that takes place is concentrated in consumption and real estate.
Whereas banks present a picture of profitability and highly liquid, credit expansion remains weak, and the little lending that takes place is concentrated in consumption and real estate.

Uganda’s banking sector has never been stronger on paper. And the Bank of Uganda’s latest Financial Soundness Indicators show why. Banks, the indicators show, are heavily capitalized, flush with liquidity, profitable, and increasingly resilient. Regulatory capital sits above 25% of risk-weighted assets, double the global standards. Non-performing loans have fallen from 5.2% to 4.1% in a year, while liquidity coverage ratios have surged to an extraordinary 580%. Returns on equity remain a solid 16 to 17%. In short, Uganda’s banks are safe, liquid, and among the most profitable in the region. Yet behind this impressive stability lies a nagging paradox:…

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