SME’s will benefit from a US$20-million African Development Bank loan to Uganda Development Bank
The African Development Bank has approved a US$20 million loan to the Uganda Development Bank Limited (UDBL), the first development finance institution established by the Government of Uganda in 1972.
The financial package comprises of a 10-year US$15 million Sovereign Guaranteed Line of Credit for on-lending to projects in various sectors and a US$5 million Non-Sovereign Line of Credit to support a financing program for SMEs. The Non-Sovereign Line of Credit will also trigger a Technical Assistance programme of up to US$1 million to help improve UDBL’s credit risk management and underwriting processes. This should help improve loan quality, corporate governance and UDBL’s capacity to track development outcomes.
The transaction will give UDBL leverage to provide long term funding to deserving customers and industries where long tenured funds are scarce due to the perceived risk profile of SMEs. It also reinforces its role as a national development bank in implementing Uganda’s National Development Plan and complementing the institution’s efforts to diversify its funding base and mobilize resources from external sources.
Historically, UDBL intervenes in the agriculture and agro-processing, hotel and tourism, education, health and manufacturing sectors, among others. The support will enhance the country’s private sector development as beneficiaries’ businesses and revenues grow, with the associated positive impact on government’s tax income.
The facility aligns with the African Development Bank’s Uganda Country Strategic Paper (CSP) 2017-2021 and Financial Sector Strategy (2014-2019). It also supports Uganda’s Vision 2040, which aims to transform Uganda from a low-income agriculture- dependent economy to a prosperous middle-income industrialized nation.
The Loan will also advance the country’s financial inclusion, gender and social welfare aspirations. It will further contribute towards provision of quality and low-cost education and health services, helping to narrow the widening social and income gaps in the country.
The African Development Bank support to UDBL is consistent with three of the Bank’s High 5 priorities: “Feed Africa”, “Industrialize Africa” and “Improve the quality of life of the people of Africa”.
Mmakgoshi Lekhethe, Executive Director at the African Development Bank for Lesotho, South Africa and Swaziland, remarked that, “The Uganda Development Bank is clearly a well-managed institution with an experienced management team in place. I am particularly impressed with the diversity of the bank’s SME portfolio…”