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UDB Facilitates Business Resilience And Recovery Post Covid-19

UDB facilitates business resilience and recovery post Covid-19

Uganda Development Bank Limited (UDB) is the country’s national Development Finance Institution (DFI) with a mandate to accelerate socio-economic development in Uganda through sustainable financial interventions. Consistent with this mandate, the Bank supports projects within the private sector that demonstrate potential to deliver high socio-economic value, in terms of job creation, improved production output, tax contribution and foreign exchange generation, among other outcomes.

These projects fall within the key priority sectors of our economy, and in line with Uganda’s development priorities, the Bank’s financing interventions are mainly in Primary Agriculture, Agro-processing, and Manufacturing which account for about 80%of its investment portfolio. The Bank however undertakes specific interventions in other sectors including Tourism, Human Capital Development and Infrastructure including ICT.

The year 2020 was unprecedented world over with the onset of the COVID-19 pandemic, bringing unprecedent shocks to demand and supply chains thus impacting economic activity and lives of Ugandans.  In response, the Government of Uganda implemented a raft of measures, including a stimulus package to be implemented by various agencies.

As part of this stimulus package, the government committed to capitalize UDB with Ugx1Trillion; to be used to support production, processing, and manufacturing of essential items for the country to be resilient amidst the supply chain disruptions, and to become self-sufficient, thus rely less on imports especially of essential items that can be locally produced.

In mid-August 2020, UDBL received Ugs.455,180,000,000as additional capital to support the above objective.

The Bank employed a series of measures to deploy this funding effectively and expeditiouslyincludingNationwide publicity through targeted media interventions boosted by the issuance of public Calls for Applications.

  1. Set-up of an online application tool to ease the process where a complete application and all documents can be submitted digitally.
  2. Building technical and process capacity within the bank to augment the business sourcing and credit appraisal processes.
  3. Entered a strategic partnership with Post Bank to leverage on their country-wide network thereby extending reach. Applications to UDBL can be submitted to post Bank branches for upcountry clients.

As a result of these and other interventions, the bank received positive response to the Calls for Applications and was able to commit ALL the new capital (approvals) and disburse a significant portion of the funds that were received.

Through 2020, the bank achieved the under listed activities:

a) Approvals

  • The Bank approved credit amounting to 444 Billion to various projects spread throughout the country.
  • 87% of this funding will go towards supporting projects engaged in Primary Agriculture, Agro-processing, and Manufacturing.

b) Disbursements

  • The bank disbursed Ugx242 Billion
  • Of this amount, Ugx.192Billion (or 79% of disbursements)is to support the three key sectors indicated above.
  • Ugx162Billion was disbursed to projects outside the Kampala metropolitan region (i.e outside Kampala, Wakiso, Mukono and their immediate environs)

 c) Commitments:

Ugx 351 Billion being the undisbursed value of projects that have been approved but partially disbursed due to the phased disbursement and implementation scheduling or financing structure of projects.

d) Pipeline

  • Ugx444 Billion being total value of loans that have screened for funding, and where the bank has either issued a term sheet or has received an application that is currently at any of various stages of the credit appraisal process.

The Bank’s funding activities through the year 2020 are as represented in detail below:

Approvals               

Sector Amount %age
Primary Agriculture 151,944,745,000 34%
Agro-Industrialization 134,807,042,074 30%
Manufacturing 100,812,970,636 23%
Tourism & Hospitality 20,142,040,000 5%
Infrastructure 11,874,334,840 3%
Health Services 10,600,000,000 2%
Others 13,583,500,000 3%
Grand Total 443,764,632,550 100%

 

Region Amount %age
Central 74,881,706,316 17%
Eastern 75,712,170,758 17%
Kampala-Metro 109,460,505,476 25%
Northern 105,857,385,000 24%
Western 77,852,865,000 18%
Grand Total 443,764,632,550 100%

 

Disbursements                       

Sector  Amount %age
Primary Agriculture 74,483,939,567 31%
Manufacturing 67,731,433,830 28%
Agro-Industrialization 50,096,031,982 21%
Infrastructure 24,781,836,450 10%
Tourism & Hospitality 12,779,026,250 5%
Education Services 1,270,000,000 1%
Others 10,876,787,000 4%
Grand Total 242,019,055,078 100%

 

Region Amount %age
Central 52,955,308,765 22%
Eastern 11,591,327,539 5%
Kampala-Metro 79,914,037,848 33%
Northern 70,719,709,861 29%
Western 26,838,671,066 11%
Grand Total 242,019,055,078 100%

 

Pipeline        

Sector Amount %age
Infrastructure 139,727,600,000 32%
Agro-Industry 119,095,433,950 27%
Manufacturing 79,759,856,541 18%
Primary Agriculture 66,659,983,572 15%
Health Services 25,319,334,000 6%
Education Services 8,703,170,000 2%
Tourism & Hospitality 4,677,000,000 1%
Grand Total 443,942,378,063 100%

Socio-economic Impact

The projects the Bank has approved will generate significant socio-economic impact over the project-lives as projected below:

Socio-economic indicator Expected socio-economic Impact
Jobs 98,667
Foreign Exchange (Ugx Equivalent) 1,925bn
Output value 8,019trillion
Tax Revenue 619bn

Support to the recovery of the Tourism Sector

Tourism has been the major sources of foreign exchange earnings for the country and has been greatly impacted by COVID-19.  Uganda is projected to lose would-be earnings amounting to about USD 5Billion over the next five years due to the of the pandemic, mainly on the back of reduced foreign visitor traffic.

In a move to save as well as revive the sector, UDB has partnered with the European Union (EU) to provide a blend of finance that incorporates affordable credit (from the bank) accompanied by an EU-funded grant; the facility is to help the businesses in the sector meet operating expenses with the view to assure business continuity and reduce possible job losses. Under this program, the EU has allocated a grant amounting to Euro 6 Million (about Ugx.27Bn) while UDB will provide soft loan facilities up to Ugx.40 Billion.

UDB remains committed to achieving our purpose which is “To Improve the Quality of Life of Ugandans” through providing innovative financing to the key growth sectors of the economy.

Key:

Approval

 

Where the bank has received an application, undertaken a full appraisal, and determined that the project is fit to receive funding from UDB
Disbursement Where the bank, following full appraisal and approval, releases funds towards the approved project for implementation of the agreed loan purpose
Term sheet A document with indicative terms issued to a prospective borrower; the same is issued following a preliminary appraisal on a credit application, pending completion of detailed appraisal and/or submission of complete documentation.
Pipeline The pool of applications under preliminary review for possible financing by the Bank

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