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UDB acts as a catalyst for growth, investing in projects with potential

Saturday March 28 2015
EACEOPatriciaOjangole

Uganda Development Bank Ltd chief executive officer Patricia Ojangole. PHOTO | COURTESY

Long troubled by funding, the Uganda Development Bank Ltd has recently rebranded after the government agreed to a new capitalisation of $170.3 million.

Dicta Asiimwe spoke with the chief executive officer Patricia Ojangole about the rebranding and its viability.

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Why are you rebranding?

Corporate rebranding is one of the key initiatives identified in the bank’s five-year strategic plan for 2013-2017. it is intended to reposition UDB as the key government agency delivering socio-economic transformation in the country. The rebranding process goes beyond changing the corporate logo and physical appearance of the bank.

More importantly, it addresses the critical issues of quality of service delivery, the mindset of its internal stakeholders, meeting and exceeding the expectations of its diverse stakeholders and fulfilment of its mandate.

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Do you feel UDB is fulfilling its role as a development bank?

Although the bank is currently undercapitalised, resulting in limitations on how much it can deliver, its interventions in the key growth sectors have positively contributed to the improvements in standards of living, employment, incomes, agricultural output and value addition to agricultural products.

More specific interventions include financing of a number of agriculture and agro-processing projects, which currently form about 50 per cent of the bank’s total book portfolio.

We have also financed various farmer groups spread across the country, supported various educational institutions and a number of hospitals in acquiring specialised equipment that was generally lacking in most health facilities, supported the acquisition of appropriate technology and skills in the manufacturing sector as well as promoted the development of indigenous entrepreneurs in the country. We also fund export oriented trade activities.

Where do you source money from, what interest rates do you offer, and have borrowers been paying back? Is the portfolio growing? 

The bank sources funding from both internal and external partners. Internal funding is mainly from the government of Uganda, which is the principal shareholder. This comes in the form of capitalisation.

External sources include the Kuwait Fund, the Arab Bank for Economic Development of Africa, the African Import and Export Bank and the Islamic Development Bank. This funding takes the form of loans and grants guaranteed mainly by the government of Uganda.

The bank offers these facilities to its customers at interest rates ranging from 10-15 per cent per annum depending on the development impact, the sector, the cost of funds, the risk profile and the tenure of the project.

Due to a robust end-to-end credit process in the bank, UDB is able to recover most of the borrowed funds. Where challenges of delayed repayments occur, these are handled on a case by case basis.

Overall, the bank’s financing activities have resulted in a growth in portfolio size and the number of projects funded. The portfolio size has grown by 74 per cent over the past two years and is even expected to grow more in the remaining three years of the bank’s strategic plan.

On the other hand, the assets of the bank have also grown by 25 per cent over the same period. Most importantly, the quality of the book has improved tremendously from what it was two years ago.

How much money can you lend out and to what kind of projects?

The bank has set limits for lending to its customers. The customers are informed about these when they come to the bank. The amount available for lending at the bank is a function of the capital available as well as head room available on the various lines of credit.

We ordinarily lend a minimum of Ush100 million ($33,146) and a maximum of up to $10 million or its equivalent in Uganda shillings, subject to availability of funds.

The bank finances projects in various strategic sectors in the economy — agriculture and agro-processing, manufacturing, education, health, hospitality, social infrastructure, construction and real estate, trade services and the extractive Industries.

The bank funds these sectors by offering various products to the public. These include project loans, working capital loans, equity finance, asset finance, lease finance, trade finance, funds managed under special terms and indirect facilities such as guarantees, bid bonds.

In addition, free advisory business development services are provided to the bank’s clients to enhance their entrepreneurial capacity as well as monitoring all projects to ensure effective implementation.

Who forms the groups you lend to? Do you ever help farmers to form groups?

The bank finances farmer groups that are already in existence with structured leadership. In some cases where the groups are weak, UDB provides advice aimed at stream-lining the operations, structure and leadership.

These groups should be formally registered as co-operatives or business associations and should demonstrate clear knowledge of business focus. They should be part of the value chain by having a taker for their produce.

Are you be focusing on growing the private sector ?

Currently, all projects financed by the bank are in the private sector. Our focus is private sector development as the engine of economic growth, employing over 80 per cent of the population and generating over 90 per cent of the GDP.

In fact, the role of the bank is to provide affordable mid to long term finance for private sector led projects in key growth sectors. However, this role can still be complemented by our role as the implementation agency of key government projects in critical sectors such as infrastructure.

In Amuria district there is an abandoned cotton ginning factory. In Lira, the starch factory is now used as a storage facility, even though farmers have gardens of cassava with nowhere to sell the crop. How can UDBL support the revival of such projects or the development of new ones that play a similar role?

Our key role is to act as a catalyst of growth and where appropriate the bank invests in locations across the country and in some cases in projects that may have limited financial benefits but exponential development impact. We are currently reviewing the causes of failure of many projects across the country.

The review is being done with a view to mobilising resources to revamp some of the more viable projects on a case-by-case basis. We are also thinking outside the box and designing products that will address the needs of different stakeholders across the country.

Most recently, we developed a well-received and successful farmer group financing model that has benefited over 20,000 households to date.

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