October 4, 2019 / 2:15 PM / 12 days ago

UPDATE 1-Uganda licenses two new commercial banks in crowded market

(Adds nationality of one of the new players)

KAMPALA, Oct 4 (Reuters) - Uganda’s central bank has licensed two new banks, bringing the total number of commercial lenders serving the East African country’s small economy to 26.

The banks join a market which some analysts say already has too many players for a $26-billion-economy and includes a local unit of South Africa’s Standard Bank, which dominates the market.

Uganda has a population of around 42 million.

The regulator has granted commercial licenses to Afriland First Bank Uganda Limited (AFBUL) and Opportunity Bank Uganda Limited, it said on Friday.

AFBUL, the central bank said, is majority owned by Switzerland’s Afriland First Group while the ownership of the second new player was not disclosed.

The new lenders are likely to face stiff competition from the crowded field, said Ramathan Ggoobi, an economics lecturer at a Kampala university.

Competition in the sector has reached “predatory levels”, he said, with some banks devising strategies to win customers from other banks rather than cultivating new ones.

“They are crowding around a very small market ... and it’s not likely that they will be sustainable in the long run,” he said.

Officials from the two lenders were not immediately available to comment.

Major players in the sector also include the local units of international giants Barclays Bank and Standard Chartered, as well as local lenders DFCU Bank and Centenary Bank.

For various reasons including insolvency and posing a systemic risk to country’s financial system, the Bank of Uganda closed seven banks between 1993 and 2016, according to a parliamentary report. (Reporting by Elias Biryabarema; Editing by Mark Potter and Deepa Babington)

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