Monday , May 20 2024
Home / Business / Centenary Bank, HFB secures a combined Shs 640bn credit to finance SMEs

Centenary Bank, HFB secures a combined Shs 640bn credit to finance SMEs

At  least 50% of the financing shall  support women-run or women-owned businesses

Kampala, Uganda | THE INDEPENDENT | Uganda’s Centenary Rural Development Bank and Housing Finance Bank have secured a combined Shs 640bn credit from the European Investment Bank for onward lending to private sector enterprises, with a focus on female borrowers and micro-enterprises in rural areas.

Centenary Bank secured Shs (€100 million) while HFB received Shs 213.billion ((€50 million).

The EIB’s investment into Centenary Bank is the largest ever microfinance credit to any country in the African, Caribbean and Pacific (ACP) regions, the lender said.

The final beneficiaries shall be micro entrepreneurs or microenterprises with fewer than 10 full-time employees. The investment also aims at supporting lending to financially underserved entrepreneurs in rural areas as their businesses continue to recover from the COVID-19 pandemic. 60% of the funding will go to projects in rural areas outside the capital city of Kampala.

Centenary Bank plans to use at least 50% of the financing to support women-run or women-owned businesses, in line with the EIB’s 2x Challenge criteria and SheInvest initiative.

This development comes as the United Nations Capital Development Fund (UNCDF) Uganda business survey from 2020 shows that microfirms and female-led firms face the largest constraints, with 80% of firms reporting difficulties in access to capital. Financial services uptake indicates that only 11% of firms have a bank loan or line of credit, a proportion that is less than half of the average of countries in sub-Saharan Africa. Most micro- and small enterprises remain excluded from mainstream banking because the focus tends to be more on corporates and high net-worth individuals.

Centenary Bank Managing Director, Fabian Kasi said the new credit aligns with the lender’s strategy and reinforces its focus to grow its “mission-critical” portfolio, particularly by extending its financial inclusion agenda to the bottom of the pyramid by increasing access to credit in the areas of microfinance and agriculture lending.

“Currently we allocate 20% of the lending portfolio to agriculture,” he said during the credit signing agreement on March.06.

Bank to issue 1.9 million loans

Kasi said the bank aims to issue 1.9 million loans to small growing businesses and microenterprises, with a specific focus on empowering 970 000 women or women-run businesses, and 1.17 million loans to microenterprises in rural areas.

“This is not merely about the numbers; it is about transforming lives sustainably, uplifting communities, and laying the foundation for a more inclusive and resilient economy,” he said.

Housing Finance Bank CEO, Michael Mugabi said, “Housing Finance Bank is keen on strategic partnerships with like-minded entities and the shared purpose to contribute to the socioeconomic development of Uganda through enabling micro, small and medium enterprises (MSMEs) especially those owned by women is the pillar of this strategic partnership with EIB.”

EIB Head of the Regional Hub for East Africa, Edward Claessen, said the funding opportunity offered to lenders will go a long way in spurring the economic growth of Uganda.

Head of the European Union Delegation to Uganda Ambassador, Jan Sadek said: “This investment partnership with a focus on women-led and owned businesses is an excellent example of how Uganda can gain from the Global Gateway – the European Union’s investment strategy aimed at leveraging investments in sectors that are key for sustainable and inclusive growth. Through the Global Gateway, the European Union can pool resources from our Member States and EU financial institutions to narrow investment gaps while promoting competitiveness.”

This is not the first time that Centenary Bank is partnering with EIB. The lender, which is the country’s second-largest bank in Uganda in terms of assets behind Stanbic Bank, has since 2008 benefited from EIB’s investments of over Shs 260 billion.

The lender has also benefited from the EIB’s technical assistance multiple times in the past, including to increase its outreach and training to refugee clients, improve its environmental and social guidelines, train its agricultural loan officers, and better support the bank’s smallholder customers.

Over the years, EIB, in partnership with various financial institutions in Uganda has provided over Shs 1.5 trillion (€346 million) to support private-sector businesses, targeting agriculture and gender equality.

The European lender has also provided technical assistance to local banks and microfinance institutions and their clients in a variety of areas including risk management, product development, environmental and social assessment, and financial literacy, among others.

Leave a Reply

Your email address will not be published. Required fields are marked *