June 29, 2022

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Uganda Development Bank unveils Shs1.8 trillion plan to step up lending

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Uganda Development Bank (UDB) has unveiled a four-year strategic plan of $500 million (about Shs1.8 trillion) to provide long-term financing to the private sector.

Despite government’s efforts of capitalising, UDB cannot meet the growing demand for capital needed by the private sector. This is partly why the development lender is seeking sovereign guarantees from Parliament and government to effect some of the endorsed financing from multilateral lenders such as African Development Bank (AfDB), Islamic Development Bank, European Investment Bank, French Development Organisation, Kuwait Fund, BADEA and EXIM Bank of India.

Addressing Members of Parliament (MPs) on the Committee of National Economy yesterday at Kampala Serena Hotel, the acting managing director UDB, Mr Denis Ochieng said: “UDB’s four year strategic plan has three impact goals which include reducing the number of people living below the poverty line of $1.25 by 500,000 people by the year 2024, building sustainable food security by lending more to the agriculture sector and industrialisation.”

Adding: “Our target is to relieve 1 million people from hunger and industrial output of Shs4 trillion.”

However, Mr Ochieng said for the programme to succeed, they will need government’s assistance in approving expanded credit lines to access funds from other international financial institutions.

Balance sheet
Presenting the bank’s balance sheet, Mr Ochieng said the total shareholders capital is Shs284 billion and the ploughed back profit of Shs50 billion brings the total capitalisation of Shs334 billion which leaves them with the balance of Shs164 billion for the bank to get fully capitalised.

“By 2021, we hope government will have fully capitalised Uganda Development Bank to enable execute our mandate,” he said.

Briefing MPs on UDB’s current balance sheet, Mr Ochieng, said by 2018, Shs155 billion was disbursed. The bank’s total assets stand at Shs277 billion.

Since 2016, the bank has been profitable, bagging Shs6.4 billion in 2016, Shs8.3 billion in 2017 and Shs9.4 billion in 2018.

On loan approvals, as of October 31, the bank had already approved Shs20.24 billion to eastern region, Shs8 billion for northern region, another Shs24.42 billion for western region, and Shs26 billion for central region.

Beginning next year, the bank will be opening regional branches starting with northern region as a priority.

Mr Henry Magino, a member of UDB’s Board, said the potential for growing this economy is still big and the development lender still needs more money to fund enterprises seeking capital on long-term basis.

The Chairperson of the Parliamentary Committee on National Economy, Ms Saida Bumba said the development banks world over are capital intensive because they need more capital to operate effectively.

Although UDB has improved, it still needs more urgent capital injection beyond Shs500 billion that government is remitting as a re-capitalisation fund.

How development banks work

In any other part of the world, development banks countries to counteract the pro-cyclical nature of the private financial system, which lends too much in booms and rations credit during crises.

Commercial banks also often fail to provide enough financing for small and innovative companies and infrastructure projects.

The National Development Banks (NDBs) play a key role in providing long-term capital needed by the private sector to finance their enterprises.

Mr Ochieng said UDB’s balance sheet of Shs370 billion ($100 million), remains very small. “This balance sheet is 0.3 per cent of the GDP. In emerging markets economies, the GDP of development banks is 15 per cent,” he said.

Globally, National Development Banks (NDBs) are key in mobilizing private sector funding to close the finance gap to reach Sustainable Development Goals.

Story by Monitor

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