Uganda’s banking sector remained stable and resilient to shocks as of the end of September 2025, supported by strong capital buffers, ample liquidity and easing credit risks, according to the Bank of Uganda’s latest Financial Stability Review.
The Central bank said domestic risks to financial stability remain moderate despite heightened global uncertainties, noting that robust economic activity, low inflation and a broadly stable exchange rate have continued to anchor confidence in the financial system.
The review shows that liquidity in the banking industry strengthened significantly during the period.
The sector-wide Liquidity Coverage Ratio (LCR) rose to 657.8 per cent in September 2025, far above the statutory minimum of 100 per cent, highlighting the depth of liquid assets held by commercial banks.
The improvement was driven by lower wholesale funding costs and increased shilling liquidity arising from the central bank’s foreign exchange purchases aimed at building international reserves.
In addition, all supervised financial institutions met the Net Stable Funding Ratio (NSFR) requirement of 100 per cent, indicating strong and stable funding structures across the sector.
Credit conditions also improved, with banking sector asset quality strengthening further. The ratio of Non-Performing Loans (NPLs) declined to 3.66 per cent in September 2025, reflecting better loan performance as economic activity recovered across key sectors.
Private sector credit growth accelerated to 9.5 per cent, supported by improved credit infrastructure and government-led initiatives such as the Parish Development Model, which has expanded access to financing, particularly for small businesses and households at the community level.
The Bank of Uganda noted that banks continue to operate with strong capital positions, providing an additional buffer against potential shocks. All institutions complied with minimum capital adequacy requirements, while Domestic Systemically Important Banks (D-SIBs) met the additional systemic risk buffer thresholds designed to protect the wider financial system.
These capital and liquidity buffers have enhanced the sector’s ability to absorb losses while continuing to lend to the economy.
Operational resilience across supervised institutions also improved during the review period, although the central bank cautioned that cyber-related risks, while lower than before, remain a concern for some banks. If not adequately managed, such risks could disrupt service delivery and operational continuity, particularly as the sector becomes more digitised.
To safeguard stability, the central bank continued to implement macroprudential policy measures and strengthened coordination through the Financial Sector Stability Forum.
Where institution-specific vulnerabilities were identified, Prompt Corrective Actions were applied to limit risk build-up.
During the period, the Bank of Uganda also issued new guidelines on the management of climate-related financial risks, signalling a shift towards integrating environmental risk considerations into banking supervision.
In addition, three large SACCOs were licensed, with more applications under review, further broadening the formal financial sector.
Overall, the review indicates that Uganda’s banking sector entered the final quarter of 2025 with strong liquidity ratios, improving asset quality and steady credit growth.
