Why Did You Close Cooperative Bank? -Solicitor General Tasks BoU As Gov’t Plans To Re-establish It
The Solicitor General has tasked the Bank of Uganda (BoU), to explain why Cooperative Bank was sold in a controversial deal that has also been questioned by the Auditor General and Parliament.
The development follows the Minister of Trade, Industry and Cooperatives, Mr Henry Mwebesa’s communication to the Solicitor General seeking a legal opinion regarding the re-establishment of the Cooperative bank.
A letter dated January 11, 2023, signed by JBR Suuza on behalf of the Solicitor General to BOU’s legal counsel Margaret Kasule reads “Which Cooperative bank did Bank of Uganda actually sell? If it is the latter, why were the assets of the former seized and sold instead?” reads part of the letter.
Cooperative Bank was established in 1967 and was transformed into a corporate body on 1997 as a precondition to receiving USAID funding. In May 1999, BoU the bank over inadequate capitalisation and insolvency and the liquidation was concluded in July 2020.
President Museveni has given the Trade ministry the green light to re-establish Cooperative Bank to provide financing to the cooperative movement.
In his letter to the Solicitor General, Mwebesa also wants to be furnished with details of shareholders who borrowed money from the defunct Cooperative Bank.
Ms Charity Mugumya, the BoU director of communications, was quoted by a local daily explaining that Cooperative Bank was transformed into a corporate entity and its liquidation was concluded without any issues.
According to Mr Ivan Asiimwe, the General Secretary, of Uganda Cooperative Alliance Ltd, UCA wrote to the Inspector General of Government (IGG) on October 20, 1999, seeking to understand why and how the Cooperative Bank had been closed but they have never received a response.
He added that the bank was closed and sold before the registrar of cooperative societies had even cancelled its registration as a cooperative.
Cooperative Bank was closed in May 1999 by the BoU due to continued poor performance and non-compliance with regulatory capital adequacy requirements. It was one of the six others closed between 1993 and 2016 by BoU majorly for being undercapitalised.
It was first registered in 1964 under the Cooperatives Act and according to records, it has never been liquidated or abolished. Following the tough economic times, its operations were disrupted and it virtually collapsed together with the Cooperative Movement, as privatization and economic liberalization took root.
In an attempt to revive the bank in 1997, it resulted in the formation of Uganda Cooperative Bank Ltd, a limited liability company, under the Companies Act. However, it lasted just two years and allegations of mismanagement and corruption led to its closure by the central bank in 1999.
