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Thursday, December 7, 2023

Ugandan Banks To Withhold $4.5 billion worth of dividend payouts As Instructed By Bank of Uganda


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According to a directive from the Central Bank of Uganda, shareholders of certain banks within Uganda would be denied their dividend for the second consecutive year. While shareholders seek their dividends and payouts, the Central Bank of Uganda issued a notice to all listed banks to withhold dividend payouts and focus only on building their liquidity buffers.

According to Business Insider Africa, the order was issued during the peak of the COVID-19 outbreak in 2020. The goal, according to the country’s central bank, was to allow commercial banks to develop sufficient financial buffers to survive the economic shocks caused by the pandemic.

Ugandan Banks Withhold $4.3billion

Ugandan Banks Withhold $4.3billion

The directive was issued in March 2020 and remains in effect after more than two years. Many bank shareholders were dismayed last month when the apex bank published a circular telling banks that dividends would not be paid for the fiscal year ending December 31, 2021.

The Bank of Uganda attributed the continued suspension of bank dividend payouts to the country’s current fragile economic situation.

As you may be aware; the East African country is now experiencing high fuel prices, supply chain interruptions, and high inflation. All of which are tied to Russia’s ongoing conflict with Ukraine and other causes.

According to Business Insider Africa; Edgar Isingoma, a partner at KPMG Uganda, told CNBC Africa earlier today that the Bank of Uganda’s decision is appropriate.

He said: ”The move by the central bank definitely is aimed at preservation of capital in times of uncertainty, vulnerability and when there is a lot of ambiguity. As you know; the ambiguity has come first of all from the pandemic. Uncertainty then followed, in terms of how these banks are going to perform; especially with regards to loans and portfolio performance.

Meanwhile, the banks are reportedly withholding up to $4.5 billion in dividend payments. This sum is calculated to cover the next two years.

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