Thursday , March 28 2024
Home / NEWS / Gov’t has injected less than UGX 200b into UDB since 2015

Gov’t has injected less than UGX 200b into UDB since 2015

UDB is expected to support businesses with low interest rates compared to what commercial banks charge

Kampala, Uganda |  THE INDEPENDENT |  Uganda government has injected less than 200 billion Shillings as a capital contribution to the Uganda Development Bank (UDB) over the last five years, the institution’s published financials show.

This is despite the fact that leaders – including President Yoweri Museveni – have been lyrical about the need to give the bank more money to lend to Ugandan entrepreneurs at below-market rates. President Museveni announced in June last year that the government had already given the bank  272 billion Shillings for recapitalization. In 2015, the government promised to give the bank 500 billion Shillings in capital. 

But UDB results for 2019 show that the government has only put 197 billion Shillings in the bank since 2015.  The biggest contribution was in 2019 where the government put 84  billion Shillings up from 48 billion Shillings in 2018. The bank’s total capital is 375 billion as of December 31, 2019.

As businesses are ravaged by coronavirus lockdowns, UDB is expected to play a vital role to provide affordable capital to support them get back to normalcy. But it needs much more money to do this, analysts have said.

Dr Ezra Munyambonera, a senior research fellow at the Economic Policy Research Centre (EPRC), said the bank needs as much as 1 trillion Shillings in capital to play a critical role in post-COVID-19 recovery for businesses. 

In its financials, the bank, which is wholly-owned by the government posted a marginal increase in net profit of 10.14  billion Shillings in 2019 up from 9.5 billion Shillings in 2018.

The bank is supposed to lend long term to businesses at a cheaper rate compared to what commercial banks would charge. In 2019, its report says, its loans to businesses reached 334 billion up from 276 billion in 2018.

Still, the report shows, the institution holds a lot of money – up to 81 billion Shillings from 13 billion in 2018 – in deposits in other banks. One can conclude that almost all the capital it got from the government that year was not lent out. 

This is an indicator UDB is struggling to get who to lend the money to or is risk-averse and limiting on the amount it gives out to businesses.

Patricia Onjagole, the UDB Managing Director said in a statement that the Bank has reviewed its strategic plan to cover the next 5-year period 2020- 2024 to include a sustainability strategy. 

She said this year, the bank will support projects that have high impact goals – projects and programs that aim to reduce poverty in Uganda, build a sustainable food system, and those that promote Uganda’s industrialization. 

To do this, UDB needs to raise more capital. It says in a statement that for the foreseeable future, the Bank plans to raise sufficient funding through a combination of the government of Uganda capital contribution, debt, and internally generated funds to invest in new developmental loans into the economy.

*******

URN

Leave a Reply

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