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High Interest Rates Attributed to Poor Loan Payment

Doctor George Wilson Ssonko, the head of Financial Consumers Protection Unit at the Bank of Uganda, says the problem arises from many borrowers failing to promptly meet their obligations of loans repayment.
Some of participants that attended Financial Litracy training by Bank of Uganda in Masaka

Audio 4

The exorbitant interest rates by commercial banks have been attributed to the poor loan repayment.

 

Several commercial banks subject loan applicants to paying varying interest rates that are even far higher than the Central Bank’s lending Rate-CRB.

Dr George Wilson Ssonko, the head of Financial Consumers Protection Unit at the Bank of Uganda, says the problem arises from many borrowers failing to promptly meet their loan obligations with their commercial banks.

The Central Bank has maintained the CRB at 10% since April this year, but the different commercial banks are charging in varying ranges beyond 23 percent.

Dr Ssonko says that despite the raising public concerns over the exorbitant and variable interest rates, the commercial bank operators are also bemoaning the poor repayment habits of creditors.

  //Cue in; “loan money ….. 

Cue out; …..terms and conditions.”//

 Luganda 

//Cue in: “Ssente z’ebanja……

Cue out; …..kuli mu kwewola.”//

He also urged borrowers to avoid being stuck on specific financial institutions for loans, a habit that exposes them to cheating through unfavorable loan conditions.

  //Cue in “nga bw’egenda mu katale….. 

 Cue out; ………..okufuna buzibu bungi.”// 

Anjelo Mukasa, a businessman from Lwengo district says that despite the high interests rates they are also exploited in the payment of a range of other charges when securing private loans, which affects their earning.

He explains that many creditors are having their collateral attached by financial institutions as a result of accruing interests rates and additional charges on loans.

 Cue in: “olwaleero nga tusomeseddwa……   

  Cue out; ……ab’enfuna entono.”//

Edward Kaliisa, the Centenary Bank Branch Manager for Masaka argued that part of this perceived high-interest rate caters for insurance charges which many creditors do not want to remit beyond a period of one year of repayments.

Kaliisa says they also don’t intend to exploit their clients but are pushed by the market conditions.