Uganda Banks Urge Government To Save Schools From Loans Dilemma

The banking sector, under Uganda Bankers Association (UBA), say they are not interested in selling distressed school properties, urging government to come up with a funding mechanism instead of advising proprietors to sell off their properties to clear debt obligations.

Speaking in an interview, UBA executive director Wilbrod Owor, told Ugandan media that education was a public good and a tool of human capital formation, whose well-being should be a concern of both government and every citizen.

Recall earlier, Finance Minister Matia Kasaija advised distressed proprietors in the education institutions to sell off some of their properties to clear debt obligations, some of which have accumulated in the last two years.

Schools have been closed since March and phased opening was suspended in June.

A top banking executive, who spoke on condition of anonymity, told Daily Monitor that for the first time in over three decades, government should take interest in what is happening in the education sector by first, establishing an Education Recovery Fund to save the sector from collapse.

He said the fund will not only save schools but will relieve banks from accumulating non-performing loans as well as helping government to mitigate risk aversion in the banking sector.

According to the banking executive, the fund which should benefit from different funding sources but driven by government and operated such as the Covid-19 Response Fund, should initially look at putting together about $300m administered through Bank of Uganda, some of which should be available to educational institutions on concessionary terms.

Daily Monitor understands that a framework has already been submitted to the Ministry of Finance, drawing attention to a funding model that can save schools from repayment distress and cash flow challenges.

The funding model is structured in a way that banks can assess and submit distressed portfolio exposures to the Central Bank for onward funding.

The model also considers educational institutions by providing them with a window through which they can apply for relief or apply to access credit to solve cash flow challenges.