: Bank of Uganda warns in its October report that high staff exits are jeopardizing the stability of the nation’s banking sector.

By Charles Wachira

The Bank of Uganda (BoU) has raised alarm over the rising number of staff exits within the banking sector, citing the trend as a potential risk to the industry’s overall stability. 

This concern comes amidst a growing wave of resignations, particularly among mid-level and senior management, which the BoU says could negatively impact the operational efficiency, institutional memory, and strategic direction of banks.

Growing Concern Over High Turnover

In a recent report, the central bank pointed out that high employee turnover within Uganda’s banking institutions is creating a challenging environment.

 “The frequency of staff departures, especially at critical managerial levels, undermines the continuity of key functions and may expose institutions to operational risks,” said Dr. Michael Atingi-Ego, the Deputy Governor of the Bank of Uganda. 

He emphasized that the problem is more pronounced in private banks, which have been grappling with retaining top talent in an increasingly competitive financial landscape.

According to BoU’s data, some institutions have witnessed turnover rates as high as 25% in management roles over the past year, with many employees leaving for opportunities in emerging sectors such as fintech and telecommunications, where salaries and benefits are often more lucrative.

Implications for the Banking Sector

The central bank highlighted several ways in which this trend is disrupting the sector. A loss of institutional memory is one of the biggest concerns.

 When experienced staff leave, their knowledge of the bank’s operations, clients, and compliance systems is lost, and replacing that expertise can take time and resources.

“High turnover, especially in compliance and risk management, puts banks at risk of regulatory breaches,” noted Atingi-Ego.

 He added that there is a growing concern about the ability of smaller and mid-tier banks to compete with the larger players who have the resources to attract and retain top talent. For example, smaller banks might struggle to maintain the same level of customer service and operational efficiency due to the frequent replacement of experienced employees.

The BoU also indicated that frequent staff changes could lead to instability in customer relationships. In the banking industry, relationships are often built over time, and customers, particularly corporate clients, value stability.

 A rapid succession of relationship managers could weaken client trust and loyalty, potentially leading to a loss in revenue.

The Financial Impact

As a result of these exits, some banks have reported increased operational costs. 

Recruiting and training new staff, particularly for specialized roles, is an expensive and time-consuming process.

 Moreover, many institutions are offering higher salaries and more comprehensive benefits packages in an attempt to attract and retain qualified professionals.

“It’s a competitive job market, and banks are having to increase compensation packages to keep their best people,” said a senior executive at a leading Ugandan bank, who requested anonymity. “This drives up costs for the banks, but we’re left with little choice if we want to maintain quality service.”

However, despite the challenges, there are signs that some banks are trying to adapt.

 Some institutions are investing heavily in employee development programs aimed at improving retention.

 Others are exploring automation and digital banking platforms as a way to reduce their dependence on human resources for certain functions.

The Role of Fintech in Attracting Talent

One of the major drivers of the current wave of staff exits is the booming fintech sector, which offers employees opportunities for growth, flexibility, and higher pay. 

Fintech companies are not only absorbing talent from traditional banks but are also leading the digital transformation of the financial services sector in Uganda.

“The fintech industry is offering more agile working conditions and better incentives, which is why we’re seeing a lot of movement from traditional banks to these new players,” said Paul Bwogi, a senior HR consultant based in Kampala.

 He noted that the competition for talent has never been more intense, and banks need to think creatively about how to make themselves more attractive places to work.

BoU’s Recommendations

In light of these challenges, the Bank of Uganda has made several recommendations to stabilize the sector. First, it suggests that banks invest more in long-term employee engagement strategies, focusing on creating a work culture that emphasizes career development and work-life balance.

“Retention needs to be prioritized, and this means focusing not just on salaries, but on the overall work environment,” said Atingi-Ego. “Banks must work harder to build loyalty among their employees, especially those in key operational roles.”

Additionally, BoU has recommended a more comprehensive review of the compensation structures within the banking sector to ensure they remain competitive.

 The central bank also stressed the need for more collaboration between banks and fintech firms to reduce the “talent drain” by exploring partnerships rather than competing for the same pool of professionals.

Conclusion

The ongoing staff exits in Uganda’s banking sector pose a real threat to stability, but they also present an opportunity for the industry to evolve.

 By addressing the underlying causes of high turnover, banks can not only mitigate the risks but also position themselves to thrive in a more competitive and rapidly changing financial landscape. 

However, this will require deliberate strategies focused on employee retention, adaptability, and stronger relationships between traditional banking and the fintech sector. The coming years will be critical in determining how well the sector can adapt to these challenges and continue to support Uganda’s growing economy.

Keywords:Bank of Uganda:Banking sector stability:Staff turnover:Financial institutions

Economic impact