Banker – customer lending dispute resolution mechanisms and their impact on debt finance in Uganda

Abstract

The banking industry is at the forefront in the provision of credit that fuels several other industries in economies around the world – this is achieved through debt financing. Customers default on loan agreements is not an uncommon occurrence and banks usually depend on established legal mechanisms to collect debts efficiently. The study focuses on the nexus between law, banker – customer lending dispute (BCLDs) resolution and the impact on debt finance in Uganda. The research adopted the doctrinal methodology with a mixture of comparative, analytical and historical approaches which were used to evaluate different resolution mechanisms available to a BCLD and their impact on debt finance in Uganda. Data was obtained from both primary and secondary sources is used to draw the nexus between the various BCLD resolution fora and debt finance and to that extent, the study finds that: mainstream judicial forum and litigation are laden with prolonged procedures that render dispute settlement an expensive endeavor and resultantly tied up needed capital; mediation, whereas relevant, is limited by its non-mandatory nature is susceptible to abuse; arbitration, although desirable, is limited by both limited awareness and uncertainty as to its applicability to lending disputes that are premised on mortgages and land whose dealings are mostly a preserve of the registrar of titles and the high court. The research compared the above with the prevailing innovations in other countries including Nigeria and South Africa where alternative dispute resolution efforts like debt counsellors, ombudsmen, and civil procedure rules for BCLD resolution exist respectively. The study finds that the legal framework for each BCLD resolution forum individually and uniquely affect debt finance in Uganda. The study therefore recommends that arbitration and mediation be prioritized as the resolution platforms for creditor-debtor disputes. Further, there is need to create a specialized court or tribunal or rules of procedure for litigation and judicial enforcement of banking lending disputes, these innovations are working in South Africa and Nigeria.