*  *  *  Uganda’s banking industry has experienced significant transformation over the past three years, with rapid growth in the number of service outlets for various categories of financial services. Branches of commercial banks, credit institutions and microfinance deposit-taking institutions have increased from 194 in 2007 to 397 in 2010.
Weak borrower balance sheets are also a deterrent to lending because they worsen credit risk and thus make the problems of adverse selection and moral hazard more prominent. The harmful effects of balance sheet deterioration were evident in recent months, when concerns about borrower financial positions caused lenders to demand a substantial premium on loans and even to drastically cut the flow of credit.