Lending to the private sector grew at its fastest pace in two years in April, according to data from the Bank of Uganda, spurred by an increase in commercial bank lending, which registered its fastest growth in nine months.
Data show that the total lending to the private sector by all regulated financial institutions rose to Shs26.3tn ($7.3bn), up from Shs23.8tn a year ago.
However, net domestic credit to the government grew at an even faster rate, rising by 29 per cent to Shs22.5bn — the fastest expansion in five months.
Commercial banks increased lending to the private sector by 8.2 per cent year on year to Shs22.4bn ($6.2tn), marking the fastest growth in nine months. In addition, the weighted average lending rate reduced to 16.6 per cent from 17.7 per cent in March.
Personal and household loans, particularly those for the purchase of non-durable goods and services, made the biggest contribution to the increase in commercial bank lending. Business service loans, especially for working capital, also drove the increase in bank lending, which is notable given that business service loans accounted for only 6.4 per cent of total commercial bank credit, while working capital accounted for just 3.9 per cent.
Although growth in loans for building, mortgages, construction and real estate — the second-biggest recipient of commercial bank loans after personal and household loans — was the strongest in nine months at 2.8 per cent, that rate remains weak compared to historical averages. Growth has remained below 10 per cent since August 2022, when it was 11.3 per cent.
