Housing Finance Bank Seeks UGX 61 Billion Capitalization

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In short
Up to 61 billion Shillings is required to meet new capital requirements by the Central Bank which asked commercial banks to raise their share capital. Housing Finance Banks capital base currently stands at 61 billion Shillings and needs to be doubled to 122 billion Shillings.

The Finance Committee of Parliament has tasked Housing Finance Bank to offer thorough justification for a 61 billion Shillings capitalization request from government.

The government, with 49.18 percent shares, owns the bank jointly with National Social Security Fund -NSSF (50 percent) and the National Housing and Construction Company (0.82 percent).

State Minister for Finance David Bahati on Wednesday told the committee that the money is required to meet new capital requirements by the Central Bank which asked commercial banks to raise their share capital. Housing Finance Bank's capital base currently stands at 61 billion Shillings and needs to be doubled to 122 billion Shillings.

Bahati says the government needs to provide 30 billion Shillings to enable the Bank to meet the new capital requirements. The additional 31 billion Shillings will be covered by NSSF. He is optimistic that the new share capital will be leveraged to grow the loans and advances from the 383 billion Shillings as at December 2016 to the projected 800 billion Shillings over the next five years.
 
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Bahati further informed the committee that in consultation with the Ministry of Lands, Housing Finance Bank agreed to come up with a mortgage product suitable for civil servants who will be based on salary levels and for a period of 20 years.

This mortgage innovation was due to the fact that the 30 billion Shillings earmarked for the capitalisation of the bank was earned from the sale of government pool houses.

"We want to use the 30 billion Shillings which we got from the pool houses to capitalize but for us to maintain the spirit of civil servants, we are going to come up with a product that will help salary earners to buy a home with a reasonable interest rate," he said.

The planned mortgage product, however, triggered questions from MPs demanding concrete proof of what the product will entail and whether it will be of benefit to low-income earners in the public service.

Kumi county MP Charles Illukor quizzed the minister on why nothing had been done for civil servants since the sale of pool houses twenty years ago. Koboko North MP Elly Asiku observed a need for concrete evidence that the civil servants will be able to afford the product.
 
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The committee requested for the audited accounts of the bank for the last five years, a business plan and growth prospects to enable members to make an informed decision on the request. The MPs also requested for a brief on the Bank's profitability over the years.

Mathias Katamba, the Managing Director Housing Finance Bank told MPs that the bank posted profits of 18 billion Shillings in 2016 up from 14 billion Shillings made in 2015. Katamba added that total assets were valued at 680 billion Shillings by end of 2016 up from 618 billion Shillings in 2015.

However, although Katamba said that 40 percent of the profits are reinvested in the bank, Medard Mwesigwa the Chief Finance officer of the Bank noted that these funds were inadequate to sustain the current capitalization requirements.

 

About the author

Olive Nakatudde
Olive Nakatudde is a URN journalist based in Kampala. Nakatudde has been a URN staff member since 2013.

Nakatudde started out in journalism in 2009 with Dembe FM radio in Kampala. In 2012, Nakatudde joined Voice of Africa as a political reporter. She has been a photographer since her journalism school days at Makerere University.

Nakatudde is interested in good governance and public policy, which she reports on intensively from the Uganda Parliament. She is a keen follower of cultural affairs in Buganda Kingdom and covers the kingdom's Lukiiko (parliament). Nakatudde also reports on education and health.