The Bank of Uganda officially increased the minimum paid-up capital thresholds for commercial banks and credit institutions on 16 November 2022. Compared to its regional peers, Uganda’s minimum capital requirement was considered low at $6.9 million. For context, Rwanda’s minimum capital is $23 million, Tanzania’s is $9.2 million, and Kenya’s is $33 million.
The increase was significant as it amounted to a 500% increase for commercial banks and a 2,400% increase for credit institutions (Tier 2). Credit institutions, referred to as Tier 2 in Uganda, are non-bank institutions authorised to accept deposits and establish savings accounts. However, they cannot establish checking accounts or trade in foreign currency. The upward revision of Uganda’s minimum capital requirement is a costly affair for shareholders as it means more capital injection.
The minimum capital threshold protects creditors from losses if a bank becomes insolvent. A bank is deemed less susceptible to failure if it