President Yoweri said that government would continue with efforts to recapitalize the Uganda Development Bank to enable it offer low interest rate loans to individuals and companies.
He was delivering State of Nation the Address delivered to Parliament, Tuesday 31 May 2016, at Serena Conference centre.
He said that the privatisation of Uganda Commercial Bank, competition in the banking sector and private sector efficiency had not brought down loan interest rates as was expected.
Museveni cautioned companies and businessmen when dealing with commercial banks, some of which use their financial illiteracy to term loan agreements as sale agreements.
“We are going to introduce legislation to deal with consumer protection. Some banks and money lenders use unethical methods to steal property,” he said, adding “the law should empower government to inquire whether these agreements were loan or sale agreements.”
Describing Islamic Banking as a good system, Museveni said that when it’s fully operational, commercial banks and “loan sharks” lending at high rates would lose out.
“Islamic Banking will bring in a new philosophy; I know that some people are resisting it, but it’s good. If you do not pay back your loan, the bank gets shares in the property.”
He said even when the inflation rate is 5%, the Banks lend at 23.5% as of now. It is these Commercial Banks that are fuelling the craze of importing by giving endless loans to importers (abagula).
“Abakola ebintu (manufacturers) and the abatunda (those who sell) do not feature much in the lending scheme of these Commercial Banks. 22% of their lending is to importing. Should we say that the commercial banks are part of the haemorrhage?”
He said Uganda Development Bank will be capitalised so that it gives low-interest loans to agriculture and industry (manufacturing).
The services sector is already employing about 430,000 people.
“We shall work with our partners abroad to increase the number of tourists to, at least, four million per annum instead of the present 1.3 million tourists per annum.”
Again, on the issue of financing, the NRM had the foresight to leave UDB out of the privatization, he noted.
He said there are companies that supplied to the Government of South Sudan but were not paid on account of the crisis that was going on there.
“I have already directed government to help these companies.”
The Speaker of Parliament, Rt. Hon. Rebecca Kadaga, asked legislators to read the President’s address and pick on areas they would like to debate on when its scheduled.
The Constitution provides for debate on the President’s address on the State of the Nation.