• Wed. Dec 6th, 2023

Bank of Uganda Extends Credit Relief for Education and Hospitality Sectors

UGANDA, Kampala | Real Muloodi News | In Uganda, the sectors hardest hit by pandemic-related lockdown measures are hospitality and education, with education continuing to remain under lockdown. Key players in these sectors mounted continuing pressure on the government to see that they receive stimulus packages, mainly in the form of credit relief, so as to stay in business and not lose their properties.

Previously, Bank of Uganda (BoU) officials had said that any COVID-19 related credit relief and loan restructuring measures established since April 1, 2020, would no longer apply. They further indicated they would make no extension beyond September 30, 2021.

Despite the announcement, the central bank had allowed a case-by-case intervention policy for sectors that remained under lockdown. However, following the elapse of the September deadline for this intervention, BoU had not given further directions on the way forward. As a result, banks began to pressure their borrowers.

Key players in the education and hospitality sectors intensified their pressure for assistance. Particularly the education sector, who continues to battle the devastating effects of the ongoing closure of schools and resulting unpaid bank loans, whilst interest on such loans continues to accumulate.

The complaints have prompted Tumubweine Twinemanzi, BoU’s Executive Director of the Bank Supervision Directorate, to issue further guidelines on repayment credit relief, which applies effective October 1, 2021, and will continue for 12 months.

“In the 12 months to September 2022, Supervised Financial Institutions (SFIs) including commercial banks, credit institutions and microfinance deposit-taking institutions are allowed to in their discretion offer a restructure in the loan as a credit relief to their creditor in the education and hospitality sectors that were affected by the pandemic,” part of Twinemanzi’s letter reads.

He explains that the restructure could also be a reduction of applicable interest rate, principal loan repayment instalment, an extension of the payment period, or a merger of all the suggested options. 

Twinemanzi says they should ensure customer protection, and the financial institutions should exhibit transparency in terms and conditions of the restricted credit facility.

According to the chairperson National Private Education Institutions Association (NPEIA), Hasadu Kirabira, the intervention will reduce the existing burden but may not be the end given the various challenges that different stakeholders in the education sector face. He still calls for an Education Sector Recovery fund that provides long-term solutions and suggests adjusting the loan repayment period in a schedule between eight and fifteen years.

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