The COVID-19 pandemic created enormous headwinds for the economy as well as the financial services sector. It became clear that banks needed to respond comprehensively, and embrace change to meet the new challenges. Ugandan banks seem to have navigated the initial storm. However, the optimistic outlook should not deceive. The need for transformation is urgent as ever because another period of uncertainty is ahead.

It is still unclear how fast the economy will recover. The COVID -19 pandemic coupled with the rising cost of living attributed to geopolitics especially the Russia/ Ukraine war is exacerbating challenges already affecting borrowers thus an expected rise in NPL. This will further erode profitability at a time when the economy is demanding businesses to create sustainable business models.

Technology has dramatically changed the banking landscape with new competitors emerging regularly and the shift towards personalized mobile solutions. To achieve a sufficient level of efficiency in the fragmented banking landscape and to be ready for profound transformation, Ugandan banks must radically transform their cost base,  streamline operations, and have strategic branches that are profit-making.

To remain profitable, Ugandan banks must address their formidable challenges ahead i.e credit, cost, consolidation, and technology. The objective is to close the gap between returns and the cost of capital to take advantage of consolidation opportunities. Now is the time to act with clarity. Action for radical change. At Summit Consulting Ltd, we will publish the annual summitBI Bank Report to take readers a mile deep into the key drivers of the banking sector, the challenges ahead, and a road map for transformation for a sustainable banking sector. Visit https://www.summitcl.com/bankingreport-2022/ to take the survey or https://www.summitcl.com/summitbanking21-downlaods/ to download the 2021 report.

By Godfrey Ssenyonjo, Summit Consulting Ltd, 2022. All rights reserved.