Uganda’s banking sector remains strong even when it is buffetted by several global challenges, the Bank of Uganda (BOU) Quarterly Financial Stability Review for March 2025 has revealed.
The report notes that systemic risks have moderated, supported by strong domestic growth, low inflation, and BOU’s accommodative policies, although challenges like subdued private sector credit growth and operational constraints in some financial institutions persist.
The report notes a stable global economic outlook through 2025, despite rising trade uncertainties.
“Domestically, credit growth rose to 6.8% year-on-year, reaching Shs 22.9 trillion, up from 6.5% in March 2024, driven by lower lending rates (17.7% from 18.3%) and improved loan repayment rates (28.7% from 25.6%). Digital lending surged, with disbursements doubling to Shs 2.9 trillion, signaling robust digital adoption,” the report notes.
The report reveals that asset quality improved, with non-performing loans (NPLs) dropping 14.5% to Shs 542 billion, reducing the NPL ratio to 4.2%. Expected credit losses fell 12.6% to Shs 736 billion, indicating a positive trend.
However, some financial institutions breached the 85% Loan-to-Value ratio limit for mortgages, prompting BOU’s regulatory actions, including capacity-building workshops.
“Liquidity risks eased, bolstered by a 4% rise in customer deposits to Shs 88 trillion and increased shilling injections from BOU’s foreign currency purchases. The Liquidity Coverage Ratio reached 94.4% in May 2025, reflecting strong resilience to liquidity shocks. Profitability also improved, with Net Profit After Tax rising 13.8% to Shs 1.7 trillion, driven by an 8.2% increase in interest income and a 19.8% reduction in bad debt provisions,” the report notes.
According to the report, the payments system saw significant growth, with mobile money accounts surging 166% to 33.7 million and digital loan disbursements reaching 4 million in volume.
“Despite these gains, BOU remains vigilant, monitoring cyber risks in digital payments and conducting stress tests to ensure stability. The central bank will maintain macroprudential measures to safeguard Uganda’s financial sector amid evolving risks,” the bank noted
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