contribute to economic growth mission : to foster pn'ce stability and a sound financial system macroeconomic stability vision : to be a centre of excellence in upholding and development, it remains an emerging field in the financial system worldwide. i, therefore, urge all stakeholders to clearly understand islamic banking and finance model ; appreciate its unique tenets that distinguish it from conventional banking and at the same time acknowledge the similarities between the two ( 2 ) models. this will significantly contribute to the effective rollout and growth of the islamic banking sector in uganda. on its part, bank of uganda will continue to collaborate with all stakeholders and ensure that the requisite regulatory and supervisory structures for supporting the growth of islamic banking and finance in this country are robust and conducive for all investors. with those remarks, it is now my honour to declare the workshop on the fundamentals of islamic banking operations officially open. i wish you fruitful deliberations. i thank you. e. tumusiime - mutebile governor bank of uganda kampala mission : to f oster price stability and a sound financial s ystem macroeconomic stability vision : to be a centre of excellence in upholding

been on the supply side of the credit market rather than on the demand side, with banks turning down loan applications because of concerns about borrower creditworthiness or the realisable value of loan collateral, given the saturated state of the property market. as you are all aware, the bank of uganda had to intervene in crane bank and take it into statutory management in november. the cause of crane bank ’ s distress was non performing loans, which had risen to more than 20 percent of its total loan portfolio and which left it significantly under capitalised. because it is a systemically important bank, we intend to resolve crane bank in a manner which preserves its core functions and services to customers. fortunately, all of the other commercial banks are meeting their capital adequacy requirements. one of the most important strengths of our banking system, and the key to its resilience, is the strong capital buffers which banks hold. in aggregate, the banking system holds total capital equivalent to 22. 5 percent of its risk weighted assets, which affords it with large buffers to absorb adverse shocks. this conclusion is also borne out by the macro stress tests which the bou carries out on a regular basis as part of its financial stability monitoring and which show that it is the large capital buffers held by banks which is the main source of their resilience to withstand adverse shocks. what are the causes of the rise in npls in the banking system? there are macroeconomic, sectoral and a variety of idiosyncratic factors which have contributed to the problems. on the macroeconomic front, the rise in interest rates in 2015, which was necessitated by inflationary pressures, combined with exchange rate volatility increased the stress on borrowers. at the sectoral level, there have been problems in the commercial real estate sector, where heavy investment in recent years has led to oversupply in the market with the result that occupancy rates have fallen and many owners have not been able to generate sufficient income to service their loans. mounting government arrears to suppliers and contractors has also contributed to npls while borrowers with business in south sudan have suffered losses because of the acute political and economic problems in that country. the idiosyncratic problems mainly pertain to failures among borrowers themselves, such as the diversion of borrowed funds from their intended uses. these factors are not mutually exclusive. for example, a poorly managed business will find it much more difficult to survive a sector