The Bank of Uganda said the asset quality of the country's banks improved in the year to June 2018, citing a resilient banking system with liquidity buffers and adequate capital.
The central bank released its latest Financial Stability Report on Jan. 7, covering July 2017 to June 2018.
It shows that the ratio of nonperforming loans decreased to 4.4% from 6.2% in that period and that lenders' core capital to risk-weighted assets was 21.8%, more than double the regulatory minimum level.
The central bank cautioned, however, that asset quality "remains a concern, especially as interest rates start to rise." It said in the future "credit quality could be affected by indirect market risks arising from interest rate policy expectations."
The Bank of Uganda has implemented measures to improve the resilience of the banking sector, notably increasing the minimum core capital of banks to 10% from 8% in May 2018.