BecomingGolden

On 3rd September 2025, Legacy Hills Investments hosted an X Space under the theme “Are loans really worth it?” The discussion brought together Maria, Chief Manager of Credit at Centenary Bank, and Gitta, a financial analyst, to share their insights on the role of loans in Uganda’s economy and the realities of borrowing.

Maria noted that loans play a critical role in Uganda’s development. She explained that they act as catalysts for financial inclusion, help grow the money supply, and stimulate the economy when invested in productive ventures such as agriculture. Beyond business, loans also empower women and youth, giving them opportunities that might otherwise remain out of reach. On the question of how banks set loan prices, Maria clarified that several parameters are considered, including the Central Bank Rate, the rates at which banks themselves borrow, interest paid on deposits, borrower risk, and the regulatory framework. She urged borrowers to safeguard their credit history as this can give them bargaining power for better terms.

According to her, borrowing makes sense when it has a clear purpose, such as acquiring assets or consolidating debt, since saving alone often takes years. However, it becomes a trap when people take loans for careless spending on things like parties or gadgets, or when they ignore repayment terms and keep borrowing from multiple sources. She advised borrowers to compare offers, negotiate terms, especially the choice between floating and fixed rates—and only commit to what they can manage.

On the issue of defaults, Maria observed that while the national non-performing loan rate is at 4.1%, Centenary Bank maintains a lower figure of 3%. She encouraged borrowers to engage their lenders early, reschedule payments where necessary, and commit even small amounts towards repayment. She also highlighted the wide range of loans available at Centenary, including products tailored for youth and women, mortgages, business loans, SME and corporate loans, agricultural loans, and even green loans for items like solar panels. She cautioned guarantors to remain mindful of their liability and reminded borrowers that communication and discipline are key to managing debt successfully.

Gitta, on the other hand, placed Uganda’s loan culture in a broader perspective. He pointed out that while developed countries have effectively used loans to spur growth, Ugandans often find themselves tied to borrowing at unfavorable rates. Commenting on interest rates, he referenced the Bank of Uganda’s benchmark of 9.75% as of August 2025, noting its influence on what consumers face in the market. He emphasized that although banks try various measures before resorting to property auctions, borrowers must understand the risks of mismanaging credit. To build resilience, he suggested that individuals occasionally borrow small amounts and repay them faithfully to create a strong credit rating for future use. He strongly discouraged borrowing for liabilities and instead encouraged Ugandans to consider investing in financial institutions themselves, as these institutions remain very profitable.

The conversation wrapped up with a reminder that loans can be both good and bad, depending on how they are handled. Borrowing with purpose, maintaining good credit history, and fostering open communication with lenders emerged as the key takeaways. While Gitta stressed the importance of investing wisely, Maria concluded by affirming that borrowing is not inherently harmful but should be approached cautiously, with clear goals and trusted financial partners.