As of June 2021, the bank says it approved credit of Ushs 706 Billion in various projects aligned to the overall recovery strategy, and expected the revived businesses to restore the number of jobs lost and increase revenues to government.
The second wave of the COVID-19 pandemic in
Uganda has led to record infections and an increasing number of deaths compared
to the previous one, which calls for adjustments in the approach to containing
The government’s response with new
restrictions on movement and gatherings for 42 days, on top of the first 12
days starting June 6, clearly pauses a socioeconomic challenge for the country.
In the first wave, the government announced
a total financing to the Uganda Development Bank worth Ushs 1,045 billion as part of
the strategy to ensure that the economy recovers from the COVID-19 pandemic.
This would be channeled to the private
sector through low-interest financing to manufacturing, agribusiness, and other
private sector firms to support the production of essential goods and goods for
import substitution and export promotion.
The targeted products included food and
beverages, textile clothing, hides and skins, paper printing, packaging and
publishing, timber and wood works, construction material, pharmaceutical, medical equipment, electrical products and agricultural equipment.
Under the program, beneficiaries were to get a loan minimum of Ushs 100 million, an interest rate of 12% per annum, for a repayment period of up to
15 years plus a 3-year grace period. To-date, most SMEs, who were the main target of the program,
say they have failed to access the money.
“The terms and conditions for the money were not conducive.
A loan of Ushs 100 million requires a collateral bigger than that amount. So
how many SMEs can afford that?” said the Executive director at the Federation of Small and Medium
Other conditions cited by the entrepreneurs include the documentation of
the business operations of up to five years.
UDB says the conditions given are aimed at ensuring that the money goes to investments
that will ably manage it and make a return on it. They are also aimed at encouraging small and medium entrepreneurs
to formalize their businesses for better operations, but also to ease government
However, there were also reports that some of the
money was being given to sectors that were not targeted by the ministry of
finance, like real estate.
The Bank’s Managing Director Patricia Ojangole refutes
partnership with European Union (EU) allocated funds in form of a grant attached to a loan to
enable the tourism sector go through the pandemic.
facility seeks to stimulate businesses operating in the tourism sector, which was
heavily impacted, by providing a grant and soft loan with flexible terms
aligned to the current needs of the sector.
approximate pool of Ushs 61.8 Billion comprised of Ushs 40 Billion UDB loan
plus Ushs 21.8 Billion EU Grant was set aside for this intervention.
is yet to give an account of the performance of this program.
However, sections of the tourism sector players cried foul,
accusing the UDB of being selective when they
learnt that beneficiaries would have to be members of Uganda
Hotel Owners Association (UHOA) and Association of Uganda Tour Operators (AUTO. This left out tour guides and travel operators, among others,
who actually account for the majority. As the new wave threatens to devastate the economy and
livelihoods, UDB the problem is the uncertainty it comes with because it is unclear when these measures will take full
Bank urges its customers, clients, partners, and the public to choose to
vaccinate and follow the Standard Operating Procedures put in place by the
Ministry of Health”, says a statement by the bank’s management.
Last week, Central Bank officials expressed
worry that Uganda had borrowed too much and spent above its ability, which would
make it hard for the government to effect respond to a large scale emergency.
And governor Emanuel Tumusiime Mutebile
sounded a warning that even relief packages this time round might not be
Last time, the BOU agreed with the
financial institutions to adjust their service terms including extending loan
repayment periods. But he said this time, the relief measures
that are coming to the end, might not be possible to repeat because commercial
banks are reeling from the effects.
For now, UDB plans to continue with the
existing programs, saying relying on the capitalization funds government
committed for the year, 2020/21 and expecting more to come next year. The impact of containment measures for the
new wave will likely slow down the fragile recovery of the economy.
“The Bank will continue to invest for
impact to achieve poverty reduction, build a sustainable food system, support industrialization,
and pursue Uganda’s import-substitution program with improved capital
investment from the government, and guided by its strategic plan”.
At the onset of the pandemic, the Government committed
to capitalize UDB to a tune of Ushs
1trillion to facilitate production, processing, and
manufacturing of essential items.
As of June 2021, the bank says it approved credit of Ushs
706 Billion in various projects aligned to the overall recovery strategy, and
expected the revived businesses to restore the number of jobs lost and increase
revenues to government.
“UDB expects the projects in their full life cycle
will create over 104,839 jobs and generate tax worth Ushs 11,921 Billion with
the associated socio-economic impact from the firms financed,” says Ojangole.
According to the Background to the Budget
2021/2022 during the first phase of the pandemic, the economy lost an estimated
100,193 formal jobs with the impact on the informal sector significantly
higher. UDB figures of show that as at June 2021,
disbursements worth Ushs 366 Billion had been made, with Manufacturing taking 106.1
billion (29.01%) and agro-industrialization, Ushs 79.5 billion (21.72%).
Primary Agriculture projects took 100 billion (27.53%).
By 2022, the Bank targets to lift over 200,000
Ugandans out of poverty, by implementing several interventions. These include sustainable agriculture
projects like construction of 25 valley dams and 25 small holders and one large
holder irrigation schemes.
The Bank also intends to prioritize increasing
reducing post-harvest losses, supporting skilling for youth and women
enterprises plus assistance to SMEs for the acquisition of modern energy or
resource efficient technologies.