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VOL. 11, ISSUE 10 (2025)
Beyond collateral: A legal analysis of the challenges and prospects of credit – Worthy lending in Uganda
Authors
Lamech Nsamba, Bannet Tumuhaise
Abstract
Debt recovery is still a significant challenge in Uganda’s Banking
Sector and among the factors that exacerbate it are the lending conditions
which are largely influenced by the collateral value. Financial Experts
including the current Governor Bank of Uganda, have on several occasions urged
Commercial Lenders (Bank) to shift from collateral lending to credit-worthy
based lending citing challenges associated with collateral lending such as the
legal dynamics in perfecting securities and foreclosure. Thus, this article
underscores the challenges and prospects of credit-worthy lending in Uganda as
an alternative to collateral lending. The study is entirely based on doctrinal
approach encompassing review of both primary and secondary sources including
statutes and other scholarly literature. The findings indicate that indeed, the
pursuit of credit-worthy lending is a noble ambition that seeks to base
financial relationships on trust and future potential rather than tangible
possessions. However, this model is fraught with challenges rooted in informal
sector dominance, information asymmetry, risk management, scalability and
technology as well as the heightened moral hazard. In conclusion, stakeholders,
including policymakers, regulators, and financial institutions, are advised to
support the growth of credit-worthy lending culture in Uganda by leveraging
technology to make credit-worthiness assessment more objective and efficient,
while still using collateral judiciously to manage risk and align incentives
effectively.
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Pages:31-35
How to cite this article:
Lamech Nsamba, Bannet Tumuhaise "Beyond collateral: A legal analysis of the challenges and prospects of credit – Worthy lending in Uganda". International Journal of Law, Vol 11, Issue 10, 2025, Pages 31-35
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