When banks and borrowers stop talking, trouble begins – A relationship for repair

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OPINION

By Peter Ssemakalu

Across Uganda, the growing number of disputes between banks and their borrowers points to a simple truth: when communication breaks down, trust follows. Many defaulting customers today are shocked to find their properties listed for sale, yet this misunderstanding has been brewing for years.

Cases where borrowers have faced foreclosures or court intervention include high-profile disputes of Simbamanyo House & Afrique suites, Sarick Construction, where the court upheld banks’ right to sell the mortgaged property, and the Emin Pasha, where the borrower secured a temporary injunction halting the sale. The latter highlights how courts sometimes give struggling businesses a chance to reorganise while still protecting the lender’s interests.

The Covid-19 pandemic, which was characterised by nationwide lockdowns, made it more visible. The aftermath saw businesses collapsing, incomes drying up, and thousands of borrowers thrown off balance. When Uganda went into lockdown in 2020, thousands of individuals and businesses could no longer meet their loan obligations. In response, the Bank of Uganda introduced credit-relief measures that allowed commercial banks to restructure loans for affected and struggling borrowers. By the end of that year, banks had approved sh7.7 trillion in loan restructures – nearly 40% of the sector’s portfolio – and over 98% of applications were approved.

It was a lifeline for many, but when the grace periods expired, some borrowers were surprised to face recovery action and even foreclosure. Many had mistaken the relief for a payment holiday with no cost implications or partial forgiveness. What began as relief turned into resentment – a reflection of the long-standing communication gap between lenders and borrowers.

Too often, borrowers sign loan documents without fully understanding repayment schedules, penalty clauses, or collateral conditions. At the same time, some banks rely on legal notices and formal letters instead of genuine dialogue. When things go wrong, both sides retreat to defensive positions – the borrower feeling betrayed, and the bank insisting it followed procedure. The result is a cycle of mistrust, where borrowers feel ambushed, and banks feel misrepresented.

To close this gap, both sides must commit to a more transparent and inclusive approach. Banks should go beyond paperwork by sitting customers down, involving credit officers, relationship managers, and, where possible, legal advisers to clearly explain loan terms, risks, and expectations before signing. Borrowers, too, should take responsibility by seeking independent legal or financial advice before committing to major credit facilities.

This ensures informed consent and reduces future disputes. Just as a doctor sits with a patient to articulate matters of body health for clear understanding, banks should do the same since credit is a matter of financial health to the borrowers that calls for a thorough understanding of obligations and implications upfront, and not learning them through foreclosure.

The banking relationship should be a partnership, not a standoff. When communication is open, expectations are clear, and advice is sought early, trust deepens. The Covid-19 experience reminded us that flexibility is possible, but understanding must be mutual. Repairing the relationship will take dialogue, transparency, and education. Only then can both lenders and borrowers truly thrive as partners in Uganda’s journey toward recovery and inclusive financial growth.

The writer is a banker and entrepreneur