Kampala, Uganda | Khisa Isaac | Uganda Development Bank (UDB) is considering reducing interest rates by two percentage points to 10% on loans to be advanced to local companies involved in various productive activities as the coronavirus containment measures takes toll on the economy.
This development comes in the wake of the government decision to inject part of the Shs 1.9 trillion obtained from the International Monetary Fund to boost the bank’s lending capacity.
President Yoweri Museveni said out of the total IMF loan, Shs 1 trillion will be channeled to the state- owned lender for onward lending to manufacturing companies to reduce on unfavorable balance of payment.
Currently, the country’s commercial banks are charging above 17% per annum on their clients.
“We have been asking for the fiscal package for this country, the incentive for this country aware of COVID-19,” said the Deputy Secretary to the Treasury, Patrick Ocailap, during the bank’s Annual General Meeting.
“This is part of the ongoing strategic direction that the NRM government is taking in terms of making capital available for investment in areas we have comparative advantage.
Felix Okoboi, chairperson Board of Directors at UDB said the local businesses are going to benefit from this new development.
“We really applaud the government initiatives. Most of the funding will go to primary agriculture, agro- industry and manufacturing,” he said.
This comes a week after UDB and the African Development Bank signed an agreement for funding worth Shs 75 billion for onward lending to SMEs and infrastructural developments in the country at a favorable interest rates.
The funding will further bolster the Bank’s capacity to provide medium and long-term development financing to business enterprises operating in the priority sectors of the economy as outlined in the country’s national development plan (NDP II) and in line with AfDB’s “High 5” priority areas.
Similarly, at the end of last year, UDB entered into partnership with the European Investment Bank to support private investment countrywide.
The new cooperation, supported by Shs 62billion from the EIB represented the first dedicated financing intended to reduce gender inequality and encourage economic empowerment of women backed by the world’s largest international public bank in East Africa.
Meanwhile, UBD’s Managing Director, Patricia Ojangole, said the lender’s profit after tax improved by 7% from Shs 9.49 billion in 2018 to Shs 10.14 billion in 2019 while the balance sheet grew by 31% to Shs 486.37 billion.
She said the improved performance was triggered by a 74% increase in government’s capital injection, improving from Shs 48.15 billion Shs 83.73 billion during the same period under review.