The umbrella body of licensed commercial banks –the Uganda Bankers’ Association (UBA) has urged borrowers to use the several available channels to address their grievances, if any, warning that blackmail is a short-term strategy.
This comes at a time Diamond Trust Bank (DTB) is battling city businessman Hammis Kiggundu popularly known as Ham over Ugx. 39.7bn which he acquired to finance his business and defaulted on payment.
Information’s shows that between February 2011 and September 2016, Kiggundu was granted various credit facilities: $6,663,453m, sh2.5b and $4.5m. The loans were consolidated in 2018 and were to run for five years, ending August 23, 2023.
Ham later dragged the same Bank that has financed his projects for over a decade to court, saying that DTB has been deducting money from his accounts without his consent
In a letter dated April 11, 2019 to DTB, Kiggundu admitted the debts and promised to repay them by selling off his complexes.
He, however, later went to court to secure an injunction against DTB from selling off his interest in the land and properties comprised at Kawuku, Victoria Crescent and Makerere Hill Road until determination of the main suit.
Turn of events
On 16th august 2020, an opinion was featured in one of weekend papers titled Uganda needs banking reforms.
In what appears to be paid for campaign, to taint the DTB’s image, the same article was replicated on various websites In Uganda.
This was a follow up to an earlier video widely circulated on social media.
The UBA says this was not done in good faith since their several clear channels which the borrower can use to address grievances, if any
In a press statement, UBA Executive Director Humphrey Owor said that the umbrella body he leads ‘ ‘ welcomes well-intentioned suggestions on how to improve the sector based on genuine concerns not falsehoods packaged under the guise of nationalist sentiments.’’
He adds: Borrowers should always be encouraged to pay their loans or dialogue with the lender in times of stress to minimize or manage risk for either party, as well as maintain stability and growth of the sector so that the economy expands and others can benefit from the same services.
Mr. owor explains that Citizens with a poor or unfavorable credit record coupled with maligning a sector especially when In default only works against growth of the credit environment and never, ever improves the position of the borrowers.
‘ ‘Instead, it adds a risk premium to the pricing of loans because it puts depositors hard eared money at risk and makes the good borrowers pay the deeds of bad borrowers. It also discourages those who would have wished to make available more money to lend and expand the economy since capital is eroded.’’ He said
There has been a debate on why interest rates are so high In Uganda, even when the central bank rate falls to a low 8%. Mr. Owor explains that part of problem are bad borrowers
He urges that Loan default or diversion should ever not be substituted with nationalist sentiments.
‘ ‘It masks and hides the real issues and should not encouraged at any level either by underhand means or even abuse of court processes to frustrate recovery of depositor’s money let out.’’
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According to the UBA Executive Director, other measures, available for struggling borrowers include loan restructure, mediation, arbitration among others
‘‘and is the reason the banking industry supports the center for arbitration and mediation’’ he explained
The commercial court is expected to deliver its ruling on DTB’s dispute with Ham on August 27, 2020