UDB promises to upset private banks' economic influence with Shs85 billion boost

UDB was allocated Shs85 billion during the 2023/24 budget reading by the Minister of Finance, Planning and Economic Development, Matia Kasaija who revealed that UDB was tasked to boost economic activities in the new financial year specifically for medium and large enterprises.

Government in tight competition with private banks

Last week, the Ministry of Finance revealed that government-owned banks have lost influence over market movements to private banks which prioritise profits over economic transformation. This was revealed in the Public Investment Financing Strategy report which indicates that 61 per cent of the banking sector assets totalling Shs38.3 trillion are owned by five private banks which are largely foreign and have biased interest rates movement upwards.

"Public banks are undercapitalised and unable to influence the market. They are instead followers of the private commercial banks," the report read in part.

UDB which is one of the dwarfed banks, has a total capitalization from the government at Shs1.22 trillion set to grow with the additional allocation for Financial Year 2023/24.

“Uganda is on a steady recovery trajectory exhibiting better and improving performance on several macroeconomic indicators. As the country’s national development finance institution with the mandate to catalyze Uganda’s socio-economic development, these economic gains require that we scale up our interventions that aim to boost a vibrant and sustainable private sector,” noted UDB’s Managing Director, Patricia Ojangole.

UDB's performance, growth strategy and outlook

UDB’s interventions will also be guided by the Bank’s Purpose Statement: “To improve the quality of life of Ugandans." This statement is underpinned by the Bank’s three High Impact Goals which are, Building a Sustainable Agrifood System for Uganda, Promoting sustainable Industrialization in Uganda and developing a Sustainable Services Sector encompassing specific interventions to address identified sector constraints in Tourism, Health, and Education sectors, and in Science, Technology and Innovation.

In the last financial year, UDB was allocated Shs103 billion which, buffered with resources from funding partners, facilitated exponential support to private enterprises resultantly posting a 52% increase in the gross loan portfolio, reaching Shs1.298 trillion by December 2022 from Shs851 billion in December 2021.

The growth was on account of disbursements amounting to Shs776.6 billion in 2022. Additionally, the bank registered a post-tax profit of Shs45 billion (unaudited), surpassing Shs38.83 billion in 2021.

“The bank’s total assets currently amount to Shs1.58 trillion, growing by 19% since the beginning of 2022. This growth is largely attributed to increased funding, primarily through capital allocations from the Government and the utilization of credit lines from our funding partners, that enables the bank to disburse credit. The bank’s gross loan portfolio as of April 2023 is Shs1.384 trillion,” Ojangole added.

Ojangole lauded the government for its unwavering support towards the capitalisation of the bank.

“Our continued growth is on account of growth in funding, mainly through capital allocations from the government and the drawdown of lines of credit from various other funding partners,” Ojangole concluded.