Housing Finance Bank seeks 30bn capitalisation from government
Housing Finance bank officials appeared before the National Economy committee to request for capitalization of the bank to the tune of UGX 30 Billion. The team from the bank led by Mr. Michael Mugabi, Executive Director – Operations was accompanied by the David Bahati, State Minister, of Finance, Planning and the meeting chaired by Hon. Syda Bumba.
The bank whose portfolio mainly consists of mortgage banking became a commercial bank in 2008 and is co-owned by the National Social Security Fund (NSSF), National Housing and Construction Company (NHCC) and the Government of Uganda through the Ministry of Finance, planning and Economic Development.
The money in question is not expected to be drawn from the consolidated fund but is already money the government holds with the bank from the sale of pool houses. According to the bank officials, NSSF increased its equity in the bank by investing Ugx 30 billion and therefore advised that the government ought to follow suit lest the fund will have more equity. The investment, however, would not change the government’s equity but rather keep it at the level it is at now but only with more money .(When NSSF invested Ugx 30bn, it technically owned more shares than GOU, however to push GOU equity to the same level of equity it was before the NSSF investment, an investment by GOU of the same amount is required.)
Hon Syda expressed her disappointment in the lending rates of the bank which stands at 21% while the mortgage rate stands at 18.5%. In the beginning the high rates were attributed to untraceable customers which was a thing of the past now. She said these prices were very high given the central bank rate stands at 10% and counterproductive if the bank through NHCC expected to provide low cost housing and accelerate the construction. The company is currently facing a backlog of close to 2 million units.
Hon Bahati, explained that Ministry could only do so much given the financial sector was liberalised. MPs accused the Minister of harming the economy with such rhetoric because a lot of things are going wrong under the guise of a ‘liberalised economy.’
The Chairperson, Hon Syda Bumba was also accused of destroying the sector during her tenure as Minister and the Agricultural Credit Facility she spearheaded only benefits a few. MPs The Minister told the committee that the ministry was under taking talks with the Central bank on many of the issues.
The bank also hopes to use the Ugx 30bn capitalization to increase its equity, leverage the balance sheet to source for more funding which in turn will increase revenues and lower interest rates.
The bank currently has 19 branches and uses the interswitch service to reach its other customers, contributes 29.7 billion to Uganda Revenue Authority (URA).
The officials also made mention that, in 2019 shares of the bank were going to be listed on the stock exchange market.