- Limited credit worthy customers. Many borrowers fail to pay back the loans and this affects the activities of commercial banks.
- Ignorance of the public on the importance and the functions of the commercial banks.
- The poor infrastructure such as bad roads, unreliable power supply especially in rural areas hinders the activities of commercial banks and makes coordination with different branches difficult.
- The concentration of commercial banks in urban areas limits the ability of these banks to mobilize savings. Most commercial banks are situated in urban centres neglecting rural areas.
- The rampant corruption and embezzlement of funds by bank officials weakens their performance.
- High level of competition among these commercial banks increases their costs of operation as a lot of money is spent on advertising and promotion activities. This limits their fast expansion.
- The large subsistence sector in the economy. The proportion of the subsistence sector in Uganda is still big whereby people do not use money in their economic activities. So they neither borrow nor deposit in banks.
- The low levels of incomes of most people in the country limits the level of savings as well as deposits in commercial banks since people use the little income to survive.
- Economic conditions such as inflation, high-interest rates on loans discourage people from depositing and borrowing.
- Inadequate capital to stock modern equipments. Most banks have limited funds to equip all their branches with modern sophisticated machines necessary for their activities.
- Conditionarities from the central bank. The activities of commercial banks are highly influenced by the central bank depending on the development objectives of the country. This interferes with the objectives of the individual commercial banks. This is common with a restrictive monetary policy.
RELATED POSTS
