commercial banks – Prime Time Communications

Out to Lunch

#OutToLunch: Surging bank profitability offers critical lessons for small businesses

By Denis Jjuuko It is that time of the year again when commercial banks publish their financial results in the newspapers as part of fulfilling the regulations that govern them. Most of them have registered year on year increases in profitability, lending, deposits and total assets among other metrics. If you only read the commercial banks’ results and made conclusions on the economy, Uganda’s economy is in such great shape. All the commercial banks combined made more than Shs2.1 trillion in profits according to the figures they released. That translates to nearly US$6 billion. The shareholders must be smiling all the way to their banks. Those who haven’t invested in commercial banks, must be wondering how to get in. The good news is that several of these banks are listed on the stock exchange. A big chunk of the money banks reported to have made came from their loan books. It isn’t entirely surprising since the interest rates they charge are some of the highest in the world. Anyone who charges upwards of 16 percent in annual interest should be able to grow every quarter, half year and annually. But I think the steady growth in commercial banks profitability comes at the expenses of other sectors of the economy. Assets of defaulters on these commercial bank loans were advertised on the opposite pages of many of the results of the banks. One hand gives, another takes, isn’t that what we have always been told? However, there is no need to begrudge banks. They aren’t entirely responsible for the high interest rates in the country. The capital requirements to start a commercial bank are prohibitive and those who recently failed to meet them were downgraded to lower tiers. Also, the government borrows at such high rates giving banks carte blanche to charge similar and even higher rates. Those who borrow and default are also many. Banks tell us, lending to Ugandans is high risk. Probably it is. I believe you know somebody who castigated you for depositing money on their mobile money account on which they had renegaded to pay back. Anyway, what can we learn from the financial performance of the commercial banks? There many lessons especially for businesses. Commercial banks just like other big business that publish their results such as telecoms have one thing in common — repeat long term customers. When you sign up for a loan such as a mortgage, you commit to pay back for such a long period. If you borrow for say 10 years, the bank is nearly assured of making money from you for 120 months. Should you fail, they have a property you gave them as collateral to get their money bank. Some of the costs they incurred to sign a customer were a one off. And if you are a disciplined borrower, they almost incur no other costs to recover their money. Long term customers who pay periodically are a goldmine for any business. Unless otherwise, many people don’t change their bank accounts. So even those who don’t borrow, there is some monthly or usage fees they pay. A bank is therefore assured of income. Telecoms make money the same way. How many times have you changed your telephone line? Many people don’t change their telephone lines. That means that a telecom is assured of making money off you until you die. Repeat long term customer at its best. Even when you die, sometimes the family keeps the line so that there is some continuity especially for those involved in doing business. As small businesses, it may not be easy to have an assured customer for 10 years or a lifetime so there is need for them to work hard to attract repeat customers. It means improving the product all the time and constantly marketing so that customers can return regularly. Commercial banks and telecoms do that all the time because if they don’t, customers can move to other banks and telecoms respectively. There is a need to observe how they market, what they do to retain their customers and try to copy that even when small businesses don’t have unlimited budgets. The writer is a communication and visibility consultant. djjuuko@gmail.

June 5, 2026

Out to Lunch

#OutToLunch Amalgamate saccos to provide women with patient capital

By Denis Jjuuko On 8 March, Uganda marked yet another women’s day. Several activities were carried out. High profile people gave lofty speeches once again. Promises were made. As is always the case in Uganda, group photos were taken. Meals I believe were served. And of course, some dancing. Reminders must have been made of what has been achieved and how grateful the women should be. But the majority of Ugandan women probably didn’t even notice the day. They were too busy eking a living or trying to survive to even notice. Women emancipation is still a pipe dream for many. There have been a lot of emphasis for women empowerment and some milestones have been achieved. Still, more needs to be done. One key area that can transform women’s fortunes is formal education. Averagely, the more educated one is, the higher the chances of better incomes whether as a salaried person or through entrepreneurship. There is usually some talk on education or the lack of it where many people point to one successful entrepreneur without formal education and present it as standard for wealth creation. Those outliers will always exist. Even among those with high formal education qualifications, outliers exist. But the majority of people without formal education don’t earn better than those with formal education. Many studies have been done on this by institutions like the World Bank. Households, communities and governments must ensure that girls stay in school for as long as possible. The minimum education should be completion of secondary education. Educated girls will value education and therefore will ensure their children go to school too. They will most likely not give birth to 10 kids they can’t look after. They will not easily think that the only pathway to success is marriage. And they won’t look at bride price as the route to their own success as parents. That way they will avoid becoming grandmothers at age 35. Formal education should be complimented with regular refresher courses on emerging issues. Today, everyone is talking about artificial intelligence and how it is disrupting everything. How can ordinary women get basics on artificial intelligence that is relevant to the work they do? Is there artificial intelligence that is relevant to a market vendor? Let them know about it. Digital training is necessary from time to time. Look at WhatsApp and its potential to connect millions and provide access to markets at almost no cost. Women leaders at the lowest level can be empowered to pass on skills to their people on what is working and how they can use emerging technologies for their own good. But so are a plethora of other applications that can enable people connect, promote their enterprises, seek for work or workers. There has always been a lot of talk on access to capital for women in entrepreneurship or to pay for needs such as school fees for their children. Some programs exist in that regard but sometimes the conditions are never favourable. High interest rates and short loan periods making it hard for women to borrow money to grow their enterprises or pay for their needs. Many women don’t own land which is the most common asset they can offer as collateral to banks and other lenders. Many women have had to rely on their own collective savings or saccos which lend at rates even higher than commercial banks though without the burden of collateral and paperwork. And lenders have observed over many years that female borrowers usually pay back more than male ones. A case, therefore, exists for a more long-term fund for women to access patient capital at low interest rates with less paperwork. Alternatively, how can many of the thousands of women saccos be amalgamated into a fund that has the organizational and operational capacity to provide fellow women patient capital? The Bank of Uganda and the government can guarantee the members protection of their money by providing oversight and insurance, similar to what they do with commercial banks or depositors’ money. The money raised by these saccos could be invested and the returns used to create an endowment fund that lends patient capital to millions of women. Women empowerment would move from being part of beautiful speeches and footnotes of studies into something ‘tangible’ that can truly transform the lives of the majority of women. The writer is a communication and visibility consultant. djjuuko@gmail.com

March 27, 2025

Out to Lunch

#OutToLunch: Government can replicate model of commercial banks

By Denis Jjuuko Uganda’s commercial banks have over the last few days been releasing their annual results, some registering record profits. One of them led the pack with an annual after-tax profit of US$100 million! It must be great time to be a banker! But then if you’re an ardent reader of Ugandan newspapers, you will notice that some dailies carry at least two pages of properties and assets being advertised on forced sale by auctioneers working for the same banks. On Facebook and Instagram, once you get your way past Ugandan authority access restrictions, you will notice many properties are on sale, coerce-fully. In many suburbs, many properties have been, in the boldest of letters, an declared bank properties and are up for sale. Of course, policy makers argued that government had no business running banks and that banking wasn’t profitable so we quickly sold them off for a song. Just like other industries. The private players who bought them simply reorganized them — sold off the fat such as properties and remained with the lean meat. They became a little bit more efficient, cutting off government fat cats and their relatives that were getting loans and not paying them back. Perhaps, that explains the number of properties that are being advertised for failure to pay back. Nobody should begrudge banks for being able to turn a profit. Like all commercial enterprises, they are in it for profit. Having seen what is possible, government is arguing that they made mistakes and they want to put their right foot back in. I must commend them for seeing the light though they would need to still use the same efficiency or better that commercial banks have deployed that have enabled them to become so successful. And the talk that they want to get back in must end so that we see action. However, they should do more than commercial banks. Since they will be using public money to set up, how can they provide affordable loans so businesses can thrive? The most common way of lending in Uganda is through providing a property as security that is higher in value than the loan amount being advanced. This model ensures that people will do everything to pay back so that they don’t lose their valuable assets. This model doesn’t necessarily put into account the actual situation young entrepreneurs face. Young people and even women rarely have assets to mortgage so they are naturally excluded from accessing capital. They are beaming with ideas and have the energy to work but don’t have the means that can lead them to access capital. Banks also know that it is a high risk to lend in Uganda so the rates are naturally high. They also spend a lot of time trying to avoid lending the money (they make more by lending to government where the risk of non-payment is low). So if private banks are making hundreds of millions of dollars, a government commercial bank can also make that money but invest it in its people affordably. Also, government can invest in sectors where commercial banks may not want to do so. Take an example of Kampala. I don’t think there is any proper city anywhere in the world where the major vehicular form of public transport is a matatu — a 14-seat passenger vehicle (that was previously a cargo van in Japan). Cities use bus transport that can carry at least 90 people. Of course, trains, trams and other means of public transport help to ensure that people move easily. A few private players have tried to introduce buses in Kampala. City, Pioneer, Awakula Ennume and now Tondeka. Kalita has been operating electric buses from Kiira Motors on the northern bypass. Kampala is one of the first cities on the continent to have public fully electric buses but they are just too few and only operating on one part of the city. The cost of an electric bus is higher than a diesel or internal combustion engine (ICE) bus of the same size. That perhaps explains why Tondeka is operating ICE buses. If they approached a commercial bank to lend them money, the bank manager would have the experience of Pioneer and City at the back of their mind. With Pioneer buses being eaten by termites around Namboole, a bank manager would think that public transport is not profitable and then stay away. Yet if you want to develop a country, you have to ensure that its population’s cost of living is low or affordable. It is the same issue farmers face. The rains are here. Can they afford inputs? Agriculture which is touted as the sector that can get Africa out of poverty is left to subsistence farmers, whose activities cannot meaningfully change their fortunes. That is why we cry to Ukraine, a country at war, to continue supplying us food when we are largely peaceful and rains dropping from the sky with reckless abandon. The writer is a communication and visibility consultant. djjuuko@gmail.com

June 19, 2023