Abbey Kibirige Semuwemba

Dear people,

Dr. Kiggundu is gone for good but there is still hope for the revival of the Greenland bank one day if what we read in the newspapers was true. I’m among the few Ugandans  and muslims who are still confused as to why Greenland was closed abruptly like that. My understanding is that General Saleh secretly purchased UCB through Greenland bank. General Saleh himself announced that he took over the bid from the Malaysian investors to keep the bank under local hands and this was in December 1998.Immediately after General Saleh’s announcement, Greeenland bank was placed under state management. Greenland bank had subsidiaries in Tanzania and Kenya (commercial Bank and foreign exchange in Kenya respectively) which were also later closed. Nobody in the government has come up to give us a detailed explanation of why the Greenland Empire was closed and whether this was necessary at the time. It is the kind of pain we have been carrying for ages and it became so much when the death of Dr.Kiggundu struck us.

Secondly, Greenland was closed when the country’s savings were improving. Before the emergency of Greenland, the savings stood at 3% of the GDP compared to 6% of GDP in 1998. At that time, Kenya had a savings rate of 22% compared to the now ill-managed Zimbabwe which had a savings rate of 32% by then. When the savings rate is higher it means there are more funds that can be borrowed for development. Ugandans can borrow money in great number to their things. All this went into decline after the closure of Greenland Bank because so many people were relying on that bank. Was the closure of Greenland an act of a president who loves rapid development in the country?

The only major management error I blame Dr. Kiggundu is the principle of disclosure in the banking sector and he was jailed for 6 months because of some of these errors. Disclosure is about providing information to the outsiders about the organization. This includes corporate social disclosure. This is where the society wants to know what it gets from the business for supporting it. It is when the society and other third parties see such benefits that they see the organization as legitimate. Whereas developed countries have disclosure measures, the developing countries like Uganda don’t have the culture of disclosure. No ends of year accounts are shown! Even banks that should display their financial statements don’t do so! That is why in 1998, Greenland Bank Ltd, and Cooperative Bank Ltd  were closed by Bank of Uganda, without any sign of financial weakness being known by the customers. So this was wrong on the side of Dr. Kiggundu but still the state should not have closed the bank. The Gordon Brown government used all the means at its disposal to save the Northern Rock Bank despite the problems they were having because Gordon loves his country and he loves the common man on the ground in the UK.

Other reasons which were given by the economists in the country for the closure are all considered just schools of thought including: failure to meet the minimum capital requirements, insider lending, corruption and mismanagement as the causes. This is all nothing when you are a politician who loves your people.The root cause of commercial banks’ problems lies in their desire to increase profits by rapidly expanding their asset portfolio (by extending loans) for which there are no adequate provisions in the form of a capital buffer. Greenland bank did this by investing in a variety of businesses and lending to people without security, and it would have worked if they had been given a chance with time to rectify their mistakes. Remember, these were long term investments NOT short term investments. Yes, Dr.Kiggundu was running the risk of the inadequacy of minimum capital standards in accounting for the risk in banks’ asset portfolio but so many international banks run this risk. In the UK here, people access credit without any security and there was nothing weid that Greenland was doing in the banking sector. I also heard that a Saudi investor offered to fix the capital problems Greenland was experiencing at the time but still the government declined the offer. All they wanted was to close the damn Greenland Bank.

Lastly, Bank of Uganda (BoU) introduced new banking rules after the closure of Greenland to justify their act but why didn’t they give Greenland more time to operate under the new rules. According to the BoU new policy, all banks will be required to maintain sufficient capital, while those under-capitalised will not be bailed out. Under the revised minimum deposit requirements, all commercial banks – both local and foreign-owned – are required to maintain at least a minimum balance of USh1bn (US$750m). All banks are required to comply with all the provisions of the Financial Institutions Statute (FIS) of 1993. According to the BoU, they will only intervene in banks that either fail to meet the capital requirements or comply with the laws and regulations as stipulated in the FIS Act. ´Where a bank is intervened and closed, the BoU´s commitment to the depositors will be limited to USh3m per depositor, covered under the Deposit Insurance Scheme´, the bank stated. My question is how is a Ugandan in USA going to recover her money now if she wakes up one morning when one of the banks in Uganda is closed particularly if her savings exceed USh3m? Can anybody also convince voters in Uganda that Kiggundu’s Greenland had failed to raise the capital of USh1bn to keep itself in business? Can you also tell voters in Uganda of what the judicial inquiry commission found and recommended after the closure of different banks in Uganda that year? This was a commission set up by Finance Minister Gerald Sendaula. Why isn’t all this information made public up to now?

Abbey Kibirige Semuwemba

United Kingdom