By David Mwanje
The Bank of Uganda (BoU) has shared its latest Financial Stability Review, showing that Uganda’s banking sector is doing well as of March 2025. The report says the sector is strong and can handle economic shocks, thanks to better economic conditions and lower loan defaults. The Non-Performing Loans (NPL) ratio dropped to 4.1% from 4.6% last year, and lending grew by 6.8% with lower interest rates. This is good news for businesses, especially small ones in farming and manufacturing, as they can now get easier access to loans. However, loan growth is still slower than before, so companies might need to use BoU support, like investing in government bonds, to grow.
Liquidity is also solid, with the Liquidity Coverage Ratio (LCR) at 580.3%, far above the 100% minimum. This stability comes from more deposits and foreign currency inflows to boost BoU reserves. For businesses, this means a safer financial environment to plan expansions or enter new markets. But they should watch out for global trade issues, like possible U.S. tariffs, which could hurt export industries such as coffee and tea.
Despite the positives, cyber risks are a growing worry. Operational losses are down, but banks are focusing on the 2024 Cyber & Technology Risk Guidelines to fight threats. This might mean higher costs for businesses using digital banking, like online payments, and some customers could face short-term disruptions during upgrades. Both groups should be ready to adapt, perhaps by learning new security steps like two-factor authentication.
The BoU is taking action to keep things stable, planning to update Loan to Value Guidelines by late 2025 and helping weaker banks meet capital rules. This should support businesses with more reliable lending, though SMEs might face stricter loan terms and need BoU guidance. For regular Ugandans, lower borrowing costs and better loan access could ease personal finances or help with big purchases like homes, but they’ll need to get used to stronger bank security measures.
Looking forward, the BoU warns of challenges from global trade tensions and the upcoming oil production in 2027, which could boost the economy but also strain finances. Businesses should diversify and strengthen digital systems, while consumers should stay updated on bank changes.
