Samuel Musoke Kintu
When the Uganda Development Bank was set up by government in 1972, the over riding aim was to spur investment in the country through provision of affordable credit to local investors in various sectors.
Over the years, the bank has faced several challenges which have greatly hindered it from fully fulfilling its mandate.
However, starting from the early 2000s government revitalized bank, capitalized it and set it on the path to do its work.
Over the last four budget cycles, UDB has received close to Shs 1 trillion from government, money it is supposed to lend to investors at favourable interest rates.
President Museveni has time and again urged local business people to embrace loans from UDB as opposed to convectional commercial banks whose interest rates range from 22% to 30% per annum.
UDB’s interest rate is 12% per annum.
Yet increasingly, there are reports that the bank has become selective in its, embracing some investors even with dubious records while rejecting others with viable business ventures.
We all know the story of a prominent local investor who put up a shopping mall in the outskirts of the city with the assistance of UDB.
There are also senior government officials (including ministers) whose private business ventures have, in part, been aided by UDB.
I have no problem with that UDB spurring economic development.
The problem in my view is the criteria or basis used to reject some loan applications
I have been told that success/failure to get a loan in the bank depends on the discretion of top officials of the bank.
If for some reason, they wake up on the wrong side of the bed, however good your application is or irrespective of whether you meet the criteria, they will still find a way of rejecting the application.
This has put many local investors in peril.
Someone told me a story of a young enterprising woman who is trying to set up a health facility on the outskirts of the city.
So far, she has imported medical equipment some of which costs upwards of $300,000 (roughly Shs 1.5 billion).
She still needs more money to put final touches on the project but efforts to get a loan from UDB have not been successful.
“She has been tossed up and down, promised this and that but she has failed. She is now trying to seek the intervention of the president,” a friend told me.
There are so many investors in this lady’s predicament.
Why would UDB deny local investors money especially those that prove that they have the capability to pay back or those that have invested in crucial sectors like health, industry, food processing, education, manufacturing etc…
This is not fair and one would ask where does UDB put all the money that government allocates it and other partners?
There is talk that some of this money is fixed in local commercial banks for quick gains.
Insider sources within the bank also claim that some of the money has been invested in various financial instruments like treasury bonds.
In effect, UDB is now competing with commercial banks in the bond market yet its primary role is to lend money.
UDB was not set up to be a ‘profit making’ operation. It was set up to fund local business ventures and therefore spur economic growth.
Therefore, its metric for growth should relate to how much money they lend to investors per year not how much profit they make.
Insiders have told me that the problem of UDB could be structural, about its leadership.
Apparently the managing director of the bank, Patricia Ojangole is so powerful that she holds sway over the board chaired even the board Felix Okoboi, who is said to be weak.
In December 2021 the minister of state for Investment, Evelyn Anite called for the disbandment of top management saying they were frustrating local investors from accessing funds.
She did not get her way.
Yet whatever the issue, UDB ought to support local investors, not frustrate them.
The author is a Ugandan who keenly follows business and economic matters.