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President Yoweri Museveni has expressed concerns over the high interest rates charged by Uganda Development Bank Limited (UDBL), suggesting that the rates are high given the country's low inflation rate.
During the opening of the Uganda Development Finance Summit at Speke Resort Munyonyo, President Museveni questioned the rationale behind UDBL's 15% interest rate.
He pointed to the fact that Uganda's inflation has consistently remained below 5%, low enough to allay any of UDB’s credit depreciation concerns.
“The people of UDB, what are you looking for? Why is your interest rate at 15%? Have you given up on heaven?” he said.
“Why would you have an interest rate of 15% when the inflation rate in Uganda is always less than 5%?
“Your concern would be that you don't want your money to deteriorate due to inflation. But our inflation is currently 3% and always below 5%.”
President Museveni proposed that the bank should offer loans at approximately 10% interest to better support Uganda's development goals.
President Yoweri Museveni and his wife Janet arrive for the Uganda Development Finance Summit at Speke Resort Munyonyo
Background of Uganda Development Bank Limited (UDBL)
Established in 1972, Uganda Development Bank Limited (UDBL) is the country's national development finance institution.
The bank was restructured in 2001 into a limited liability company wholly owned by the Government of Uganda, with equal shareholding between the Minister of Finance and the Minister of State for Investment.
UDBL's mandate is to accelerate socio-economic development in Uganda through sustainable financial interventions, focusing on priority sectors such as agriculture, industry, tourism, housing, and commerce.
The bank operates under the Ministry of Finance, Planning and Economic Development and plays a crucial role in implementing Uganda's development strategy by providing long-term financing to projects that contribute to economic growth and job creation.
During his address at the summit, President Museveni said high interest rates charged by UDBL are a major barrier to accessing affordable financing for development projects.
He questioned the justification for a 15% interest rate when inflation remains low, suggesting that the bank's operational costs and staff salaries might be contributing to the high rates.
To address this, he proposed that UDBL staff consider adopting more modest lifestyles to reduce expenses, thereby enabling the bank to lower its interest rates and provide more accessible financing to Ugandans.
“This, of course, means that the general manager and all the other crowd of parasites (staff) must get a lower salary,” he said.
“If only you had a more modest lifestyle as bureaucrats of these key development institutions. Until recently, I heard that a professor in India was earning around $400. A modest lifestyle would enable you to give out affordable financing to your clients.”
Implications for Uganda's Development Strategy
Affordable financing is essential for achieving Uganda's development goals, as outlined in the National Development Plan and Vision 2040.
High interest rates have been cited by experts as a deterrent to investment in key sectors such as agriculture, manufacturing, and infrastructure, hindering economic growth and job creation.