KAMPALA, Uganda — Large depositors of the defunct Mercantile Credit Bank Limited are facing a deepening financial crisis as the Bank of Uganda (BoU) delays compensation, leaving many on the brink of economic ruin.

The bank’s sudden closure in June 2024, attributed to undercapitalization, poor governance, and non-compliance with banking regulations, has had a devastating impact on large depositors, who have been left without access to their funds.

“We are talking about people who had invested their life savings, their businesses, and their livelihoods in Mercantile Credit Bank,” said Samuel Aliku, chairman of the local council in Pepsi-Cola village, while speaking during a baraza organized by Kigo Thinkers, a think tank organization, on Thursday. “The delay in compensation is pushing them to the wall, and many are on the verge of collapse.”

The Deposit Protection Fund, which is managed by the BoU, has compensated smaller depositors up to a maximum of UGX 10 million. However, large depositors, who had invested far more, have been left without any restitution.

“The BoU’s delay in compensating large depositors is unacceptable,” said Richard Byarugaba, a retired banker and financial expert, who also spoke at the baraza. “These individuals and businesses had entrusted their funds to Mercantile Credit Bank in good faith, and it is the BoU’s responsibility to ensure that they are protected.”

Byarugaba emphasized that the delay in compensation is not only affecting large depositors but also having a ripple effect on the entire economy. “Businesses are collapsing, jobs are being lost, and the economy is suffering,” he said. “The BoU needs to take immediate action to address this crisis.”

The BoU has attributed the delay in compensation to the complexity of the process, which involves verifying the claims of large depositors. However, large depositors argue that the process is taking too long and that they are being left to suffer.

“We urge the BoU to expedite the compensation process and provide us with a clear timeline for when we can expect to receive our funds,” said Stephen Kasenge, an auditor and investment club member who had invested in Mercantile Credit Bank, and also spoke at the baraza. “We cannot continue to wait indefinitely while our livelihoods are being destroyed.”

In June 2024, the Bank of Uganda shut down Mercantile Credit Bank Ltd, citing undercapitalization, poor governance, and non-compliance with banking regulations as the primary reasons. This move was made in exercise of the Bank of Uganda’s powers under the Financial Institutions Act, 2004, as amended.

At the time of closure, the Bank of Uganda assured depositors that their funds were protected by the Deposit Protection Fund of Uganda (DPF) up to UGX 10 million. However, this has provided little comfort to large depositors who had invested far more in the bank.