BISHOP STUART UNIVERSITY

NAME: ONGOM DAVID DICK

REG. NO: 18/BSU/BBA/01070

FACULTY: BUSINESS, ECONOMICS AND GOVERNANCE

COURSE: BBA 3

COURSE UNIT: INTERNATIONAL FINANCE

COURSE LEADER: MR. NAGAABA NICKSON

YEAR: THREE

SEMESTER: ONE

ACADEMIC Year: 2021/2022

 a)

Monetary system in Uganda consist of central bank and commercial Bank

In early 2000_2009 the Uganda banking industry there was restructuring. Uganda embarked
on banking sectors reform with h the aim of improving performance in banking. This was
through liberalisation and strengthening regulation put in place.

The result of the reform in the industry has been advancement in technology, such as
electronic banking, internet banking. This has brought great changes in mode of operation in
banking system, relationship with customers in carrying out transaction in the process some
banks were pushed out of the system in Uganda

The restructuring of the sector contributed both positively and negatively

Performance of central and commercial Bank remains steady and improved domestic
commercial banking

In 1999, there was a policy which classified Banks into Tiers IV, III, II credit institution I
commercial Banks which hold saving and fixed deposit Accounts for both local and current
currency.

Commercial Banks in Uganda do carry out transaction in foreign currency such as dollars,
pounds.

Promotion of public confidence. Financial institution promoted confidence in public by

ensuring adequate fund (liquidity) for the bank to run effectively.

Expansion in credit/landing. This has enabled many borrowers in Uganda to access credit
compared to the time when there was narrow coverage by banks.

Online banking. ATMS, mobile money banking has reduced cost in both the customers and
the bank but in the other hand has caused unemployment in the sector.

In particular, there should be safeguard of electronic system to avoid crimes and attack by
introducer protection policy and prevent threat relating to finance. The integration of
electronic banking has affected both regulation and supervision of Banks which was a
tradition in Uganda for credit management risk.
There is inter-correction between many banks on Uganda. Example the use of financial card
has ease credit reface in the industry and greater engagement between authorities.

Improved customer experience. The restructuring has made it easier to perform transaction
when at the same time show transparency in the system. Today when withdraw is made,
deposit is done, it is replaced in customer registered phone number

Advancement in technology has made the business perform financial transactions and
providing more transparency since they have better access to services

Cost of operation in Uganda financial system has reduced. New tools developed has made
great changes in banking operations instead of using the manual system, technology has come
in hence lowering cost of operation.

b)

It is true Bank of Uganda supervises most activities of the commercial Banks. Most Banks
(commercial Banks) which were operating under the control of Banks which were operating
under the control of Banks of Uganda have been closed in Uganda. In my debate I do
attribute to closure to the closed Banks themselves. Among the Banks which were closed are
Crane Banks closed in 2016.

The underlying reasons for their closure are as follows. In my debate about the closure.

Mismanagement of funds and fraud. Bank of Uganda being the controller of all banks
(commercial banks) in the county has done their part regarding what is to be done by every
bank, but the closed commercial banks themselves have failed to manage their funds
effectively. More so, there have been internal frauds leaving the banks with inadequate fund
that can make them run. The closure is therefore attributed to mismanagement and fraud with
in their systems.

Flaunting Banking laws. All banks in Uganda and other financial institutions such as
Stanbic banks, DFCU Bank, Cairo bank, and Absa banks all operate under the banking law
whose implementation is done by bank of Uganda to make sure all laws are operational
example setting the lending interest rates to be within specified rate of percentages. In the
event that there is failure of adjustment by respective banks Bank of Uganda (B.O.U) can go
ahead and closed a particular bank and there will be no blame on them as parliament wants it
to be.
Provision of inaccurate information to government. B.O.U is under the government of
Uganda and therefore all information related to banks is submitted to B.O.U which is under
the government of Uganda. Report relating to commercial bank being accurate to the
government had rendered the closure of these commercial banks in Uganda.

Financial crimes. Commercial banks engaging in financial crime like encouraging money
laundering and other are subject to closure by bank of Uganda and therefore when laws are
issued by bank of Uganda it is upon the commercial bank to implement so that they remain in
operation. Financial crimes led to the closure of banks by bank of Uganda.

Non-performing loan. Some commercial banks which were closed by bank of Uganda were
deeply rooted in non-performing loan which led to bank becoming insolent in such a case
bank of Uganda can be forced to close the bank since it is not able to operate effectively.

Weak private credit growth. In the debate I would say due to the weakness in private credit
growth and lack of customers leaving the bank to operate at high cost when actually receiving
very little.

Low profitability. Much as the parliament is to put pressure on the governor of bank of
Uganda, there were banks which earned very low profits but instead but incur high charges of
operation. Banks get their incomes from charges to customers for their services being
provided, interests on its assets. When they face higher expense compared to profit and
higher liabilities, this affects their retained earnings and could be a reason for closure.

Over expansion. The commercial banks have located branches over very many areas which
in actual senses they are non performing, the bank incur losses, expenses which should have
been met at only few active branches. These many branches have failed leading to closure.
Reference

Principle of Banking UBF

International finance lecture notes by Nagaba Nickson