Bank Privatization in Sub-Saharan Africa: The Case of Uganda Commercial Bank

Making Finance Work for Africa

“…This trend has been shown, for example, in two detailed recent studies of Nigerian and Ugandan banks (Beck, Cull, and Jerome 2005;Clarke, Cull, and Fuchs 2006). It is easy to see why, generally speaking and in normal times, lending can contribute much more to value added and to the profitability of banks.…”

“…The more recent case of Stanbic's purchase of the Uganda Commercial Bank (UCB) shows even more promising features, according to a new study by Clarke, Cull, and Fuchs (2006). Not only has Stanbic, which integrated the former state monopoly bank into its own Ugandan operation, achieved profitability (greatly assisted by the comprehensive recapitalization of the UCB by the government before sale), but more remarkably, only one branch has been closed, and several previously unprofitable branches have been returned to profitability.…”

“…One partial success story that illustrates the problems is the abortive first privatization attempt of the Uganda Commercial Bank to a company registered in Malaysia. That company proved to be a front for persons that were deemed unsuitable by the Ugandan authorities and who proceeded to self-lend on a large scale (Clarke, Cull, and Fuchs 2006). 11.…”

Financial Access and Exclusion in Kenya and Uganda

“…This can be explained from its history -as indicated above the UCB was formed out of the UCSS and co-operative activity was further consolidated under its remit by Amin in 1972 (Clarke, et al 2007). The 1970 Co-operative Act removed autonomy and gave rise to extensive political interference, and although this autonomy was restored in 1992, marketing cooperatives continued to suffer from a lack of trust and remain insolvent (Ssemogerere 2003).…”

“…Financial sector reform in the 1990s liberalised interest rates and produced positive real lending rates (Brownbridge 1998a). But the poor performance of the public banks, and in particular UCB, resulted in its privatization and sale to the South African owned Stanbic in 1999 (Clarke, et al 2007). While macroeconomic management produced high TB rates in the late 1990s, these then fell again after 2001 and caused the banks to start lending again (Seibel 2003).…”