Providing Cheep Development Finance [interview]

The Uganda Development Bank Ltd (UDB) recently unveiled its new corporate identity. CEO Patricia Ojangole talked to The Independent about the milestone, their operations, as well as other pertinent issues in the banking industry.

What were the reasons behind UDB’s rebranding?

Corporate rebranding was one of the key initiatives identified in our five-year strategic plan 2013-2017. It was intended to reposition the bank as a key partner in the socio-economic transformation of the country. Of course the rebranding process goes beyond changing the corporate logo and physical outlook. More importantly, it addresses the critical issues of quality service delivery, change of mindset of its internal stakeholders, as well as meeting and exceeding the expectations of its diverse stakeholders in the fulfillment of its development mandate in transforming Uganda into a middle income country as envisaged in Vision 2040.

How is UDB dealing with the challenges facing the banking industry in Uganda?

Some of the challenges currently facing banks in Uganda include the depreciating shilling, stiff competition and high non-performing loans. On volatility on currency, UDBL minimizes exposure to customers by considering loans in currencies similar to the currencies of the customer’s business cash flows. That is to say if the customer’s cash flows are in shillings, we lend in shillings. UDB’s favourable lending terms such as interest rates, long -term capital plus grace period help the bank to stay ahead of competition. In addition, the bank has managed to maintain good asset quality by carrying out proper due diligence and ‘know your customer’ exercises of all borrowers and their businesses, monitoring of projects during and after implementation and undertaking appropriate follow up, collections and recovery procedures.

What opportunity does the UDBL have in this market?

UDBL has a meaningful role to play in the economic growth and stabilization in the country. The development and promotion of strategic sectors in the economy like agriculture, industry, infrastructure, commerce or other economic sectors requires massive and sustained intervention by the government. Even countries that are economically and technologically more aanced than Uganda still operate a number of Development Finance Institutions like UDBL as a vehicle for strategic intervention. Such interventions, usually private sector-driven require patient capital, which is not readily available in our market today. There is therefore enormous opportunity for UDBL to provide the much required mid to long- term finance in the strategic sectors such as the ones mentioned above.

What success stories can you share with us in relation to UDB’s work?

Though the bank is currently undercapitalized resulting in limitations on how much it can deliver, the Bank’s interventions in the key growth sectors have positively contributed to the improvements in standards of living, employment, incomes, agricultural output and value-addition to agricultural products. These activities have resulted into a 75% growth in the bank’s loan book over two years and total asset growth of 25% over the same period. The Bank has received approval by shareholders of increase in share capital from Shs 100 billion to Shs 500 billion after returning the Bank to profitability, has the lowest interest rates, and was awarded best performing African DFI by the Association of African Development Finance Institutions among others.

What is your general assessment of the banking industry in Uganda?

The banking industry in Uganda is mainly composed of commercial banks, most of them foreign-owned and profit-driven. The industry is oligopolistic in nature, which is to say that they offer similar products and their pricing is almost uniform including bank charges, interest rates and associated fees. There is a high concentration of banks in urban centres leaving the rural areas where the population is higher un-banked.

Recent press reports about UDB gave a negative impression about the institution in regard to management and disbursement of funds. What is happening?

The negative reports were a result of changes that happened in the bank following the appointment of the new board in 2012 and later a new senior management team. The reports were precipitated by some of the staff that left the bank as a result of staff rationalization. The reports were a subject of court proceedings and eventually the court rulings were all in favor of the bank.

There is a notion that public enterprises like UDB are prone to mismanagement. What is your take?

This is unsubstantiated. With the right tone at the top, all public enterprises can be well managed. This has been demonstrated in some public enterprises such as URA, National Water amp Sewerage Corporation, and KCCA.

From the finance perspective, how should small and medium enterprises deal with the high cost of doing business in Uganda?

Organisation in SMEs is still lacking, which creates a number of risks from a financing perspective. In terms of cost of doing business, SMEs would have more bargaining power in addressing common problems if well organized and this would go a long way towards helping them to reduce the costs of doing business.

Now that UDB has rebranded, where do you want to see the bank going forward?

We want to see this bank as the authority on development finance in the country. I am confident that we have the capacity to make this a reality and we are determined to positively impact the social economic transformation of Uganda.

Source : The Independent

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