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Uganda Development Bank Limited rated Best DFI by AADFI for 2014 and 2015.

posted 24 Nov 2016, 04:58 by David Tamale   [ updated 24 Nov 2016, 05:46 ]
For a second year in a row, Uganda Development Bank Limited has been rated best performing Development Finance Institution (DFI) by the Association of African Development Finance Institutions (AADFI) in 2014 and 2015 respectively.

This achievement is timely for the Bank as it validates the outcome of the reform process that the Bank continues to implement. This has entailed reengineering systems, human capital, policies and processes in the Bank as Moses Ebitu, Manager Risk explains below the implications of this stretch rating to an institution.

Uganda Development Bank's AADFI rating reflects a number of significant credit strengths, including:

Strong capital adequacy ratios; Growth in liquidity levels from capital injection and borrowings including strong financial support reflected in the recent general capital increase and lastly

A preferred creditor status that has ensured a good repayment performance even from borrowing customers that have gone through debt restructurings in recent years.

The AADFI rating incorporates the relatively weak average credit quality of its borrowing member countries and high borrower concentration. The rating could face upward pressure if the Bank reduces its exposure to troubled credits. However, given the Bank's mission to serve Ugandans, coupled with the increased rate of none performing loans in the banking sector, economic and financial challenges facing the country, we view this as unlikely in the shortto- medium term, notwithstanding management's plans to increase lending to higher value projects. This is coupled with the Bank's ability to attract new projects to increase social economic impact to the country.

These ratings are not static. The Bank must strive to improve its compliance levels to the respective parameters used by AADFI in rating institutions. For instance, the rating could face downward pressure if a bank's capitalization and/or liquidity levels decline; if its credit quality experiences further deterioration and loan portfolio performance suffers as a result. Other consideration could arise if a bank fails to comply with any of its financial policies; or if its risk management framework proves to be ineffective.

Nevertheless the 2014 and 2015 ratings reflect a positive strength on Uganda Development Bank and growing confidence on its strategic goals and mandate.