Slow courts, frozen capital: why Uganda’s banks need ADR now

There is a quiet crisis running through Uganda’s banking sector, one that does not announce itself in dramatic headlines but accumulates steadily in bloated legal dockets, frozen balance sheets, and loan officers who have learned, through hard experience, to say no.

It is the crisis of commercial dispute resolution, and on Wednesday morning at the Commercial Court ADR Round Table, the Bank of Uganda’s Governor stepped forward to name it plainly.

Michael Atingi-Ego, addressing an audience that included the Chief Justice, senior judges, and the chief executives and board members of Uganda’s supervised financial institutions, made the case that the efficiency of the courts and the health of the financial system are not separate concerns, they are one and the same. “The stability of the financial system,” he said, “is inextricably linked to the effectiveness of the judicial system.”

“Prolonged litigation ties up capital in non-performing assets, constrains the banking sector’s capacity to support economic activity, and can significantly impede efforts to deepen financial inclusion.” Michael Atingi-Ego, Governor, Bank of Uganda.

The Governor’s framing recast what might otherwise be regarded as a procedural legal reform into a macroeconomic imperative. Banks and other financial service providers, he argued, depend fundamentally on two things: enforceable contracts and timely dispute resolution. When either fails, the consequences ripple outward, from the courtroom into credit markets, from individual disputes into systemic caution.

Through its supervisory engagement with financial institutions, the central bank has observed first-hand the institutional strain that protracted litigation imposes, on balance sheets, on operational focus, and on the strategic allocation of scarce management attention.

Cases that drag through the courts for years do not merely consume legal resources; they crystallise non-performing assets, constrain lending capacity, and force institutions into defensive postures that ultimately harm the customers they exist to serve.

The antidote, Atingi-Ego argued, lies in Alternative Dispute Resolution — mediation, arbitration, and structured settlement processes that can resolve commercial conflicts faster, at lower cost, and without the zero-sum adversarialism that characterises courtroom battles. “ADR mechanisms, when properly utilised, offer a faster, less costly, and value-preserving pathway, one that benefits all stakeholders,” he said.

The forum forms part of a broader judicial reform push that is already in motion. The round table follows directly from resolutions adopted at a recent Judicial Officers’ Colloquium on ADR, and a Settlement Fortnight, a dedicated two-week period focused on clearing commercial disputes through negotiated settlement, has been scheduled for 18 to 29 May 2026. The Judiciary’s decision to move swiftly from policy discussion to practical implementation drew specific commendation from Atingi-Ego, who described it as “both timely and necessary.”

“When financial service providers encounter prolonged delays in resolving disputes, they inevitably become more risk-averse, which in turn raises the cost of access for potential consumers and undermines broader financial inclusion objectives.” Michael Atingi-Ego, Governor, Bank of Uganda.

Perhaps the most pointed element of Atingi-Ego’s remarks was the connection he drew between dispute resolution inefficiency and financial exclusion, a linkage that is rarely made explicit but which the data on Uganda’s credit markets quietly confirms.

When banks repeatedly encounter lengthy, unpredictable litigation when seeking to enforce loan agreements, the rational institutional response is to tighten credit conditions, demand higher collateral, charge wider interest rate spreads, or simply decline to lend to higher-risk segments.

The ultimate loser is the borrower at the margin — the small business, the first-time credit seeker, the individual with limited collateral, for whom access to finance already hangs by a thread.

In this light, ADR is not just a convenience for commercial litigants; it is infrastructure for financial inclusion. A court system that resolves disputes swiftly and predictably is one that gives lenders the confidence to extend credit more broadly, at lower cost, to more people. It is, in effect, a public good whose value extends far beyond the parties to any individual dispute.

The Governor reserved particular emphasis for the question of institutional leadership. Welcoming the decision to bring bank chief executives and board members into the round table, he argued that ADR cannot be left to legal departments to champion in isolation.

It must be embedded in institutional practice, supported by clear mandates and robust governance frameworks, and driven from the top. “Leadership commitment at the highest level is essential,” he said, “to ensure that ADR becomes the norm rather than the exception.”

That is a significant ask of institutions whose instinct, particularly in complex commercial disputes, may be to pursue maximum legal advantage rather than negotiated resolution. Shifting that culture requires more than policy endorsement; it requires boards and executives who are willing to measure success not by courtroom victories but by speed of resolution, quality of outcomes, and the preservation of commercial relationships that litigation typically destroys.

The Bank of Uganda’s active participation in Wednesday’s forum signals that the central bank intends to use its supervisory leverage to encourage, and where appropriate, press, institutions toward that cultural shift.

Whether through direct guidance to bank boards, integration of ADR metrics into supervisory assessments, or public advocacy of the kind on display at Munyonyo, the message from Kampala’s central bank is clear: faster, smarter, more collaborative dispute resolution is no longer optional for a financial sector with ambitions to serve all of Uganda’s economy.