Uganda Development Bank (UDB), the country’s national development finance institution has been assigned a national long-term rating of ‘AAA (uga)’ with a stable outlook by Fitch Ratings.
This the highest attainable credit rating on Uganda’s national scale.
A credit rating is an assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation.
Assigned by Fitch Ratings, a world-renowned international credit rating agency, the bank was also assigned a long-term Issuer Default Rating (IDR) of B+ with a negative outlook, the same pegged against Uganda’s Sovereign rating, given that the bank is wholly owned by the government.
Addressing the media, Patricia Ojangole, the managing director of UDB said the current rating is a testament to the Bank’s robust institutional health an lends credence to the overall sustainability of the bank.
“We are grateful to out various stakeholders, but more especially the Ugandan government, for the ongoing support that ensures the Bank continues to deliver its manadate,” Ojangole said during the press announcement held at UDB offices on Tuesday.
Fitch conducts a comprehensive assessment of a participating institution against a common set of parameters, following from which, it assigns a credit rating.
Worth noting is that investors use these credit ratings as a guide as to which investments will not default and subsequently yield a solid return. Fitch bases its ratings on factors, such as what kind of debt a company holds and how sensitive it is to systematic changes like interest rates.
Ojangole, noted that for UDB, as is the case for many development finance institution in the world, a credit rating is a vital tool in enabling its funding partners to assess its relative buoyancy.
She observed that also, the bank lends on preferential terms to borrow in strategically important sectors of the economy, in particular agriculture, agro-processing, and manufacturing, is funded predominantly by shareholder equity in addition to relatively low-priced borrowings that are mostly government-guaranteed and lends to potentially riskier sectors that are underserved by other financial institutions.
“What this rating means for us is that UDB can potentially access funding from multi-lateral funders at relatively lower rates; this is because investors can accept lower lending rates to entities that present with lower risk of default. Additionally, it means the Bank can access a wider audience of funders with greater ease and confidence,” Ojangole said.
She recognised the efforts of the government, the Ministry of Finance, among other stakeholders who have been instrumental towards the Bank’s growth and the support that has been rendered over time.
“We commit to identifying opportunities where we can transform the lives of Ugandans by supporting projects that are purposed to improve the quality of life across Uganda, as well as the country’s social-economic agenda.” Ojangole concluded.