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Report: Uganda concerned over commercial bank interest rates, threatens cap

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Report: Uganda concerned over commercial bank interest rates, threatens cap

Uganda is considering capping commercial bank interest rates if lenders fail to reduce them in line with falls in the central bank rate, Business Daily Africa reported Aug. 8.

The current central bank rate is 9%, while the average commercial bank interest rate is about 21%, the report noted.

"I had started drafting a Bill to cap interest rates the way Kenya did... I abandoned that idea, but it appears you [banks] want to force government to do just that," said Uganda's finance state minister for planning, David Bahati. He added that although banks have been reducing rates, the pace has been slow and has left loans too expensive for the majority of borrowers, Business Daily Africa reported.

Banks and civil society organizations have argued that a similar cap in Kenya failed, making banks more risk-averse, the report noted.