Borrowers in Uganda are complaining of harassment as banks change loan terms on the expiry of Covid-19 credit relief measures.
The Bank of Uganda (BOU) had in an attempt to protect local businesses during the Covid lockdown, introduced relief measures in April 2020, extending loan restructuring, which yielded repayment holidays and extended loan servicing timelines for affected borrowers.
The loan restructuring attracted hundreds of borrowers and more than 20 commercial banks, according to official records.
But the relief measures expired in September 2022 after three extensions, triggering an increase in minimum capital requirements for commercial banks in December 2022 – from Ush25 billion ($6.71 million) to Ush150 billion ($40.27 million) – to cushion lenders from future credit shocks.
Local banks are obliged to comply with the new capital requirement by the close of December 2024, according to the industry regulator.
The total value of restructured loans stood at Ush7.7 trillion ($2.07 billion) in 2020 but dropped to Ush6.9 trillion ($1.8 billion) in 2021 as the economy opened up.
But there have been complaints of banks changing borrowers’ repayment schedules overnight, raising fresh questions about consumer protection.
“We received complaints from some borrowers, particularly in the agricultural sector, about banks that are asking them to make monthly loan repayments against their loans, yet they signed up for periodic repayment schedules that are pegged to harvest seasons,” said Hannington Wasswa, BOU’s Director for Commercial Banking.
Other borrowers have been reportedly told to clear all outstanding principal and interest bills within three months after the expiry of credit relief measures.