Gov’t told to recapitalise UDB to drive high value growth

KAMPALA - Uganda must strengthen its financial sector, expand its capital markets, and change how it allocates money if it wants to achieve lasting economic transformation, according to Arshad Rab, chief executive of the European Organisation for Sustainable Development and chairman of the International Sustainability Council.

Speaking at the Development Finance Summit in Kampala, organised by the Uganda Development Bank (UDB), Rab said in his keynote address that there is urgency in how banks and capital markets are structured.

“The profitability of the financial sector needs to reflect the sustainable economic growth agenda,” he said.“Multifold GDP growth requires well-capitalised domestic banks. I know Uganda went through recapitalisation in 2022, but if we want to turn the government’s vision into reality, there is no other way than to recapitalise the financial sector further.”

Rab called on policymakers to raise the capital base of all development and public banks, such as UDB.

He argued that private banks will follow once public institutions set the pace, but only if those banks are professionally managed.

“At least here in Uganda, public financial institutions are very well functioning, but they need to be strengthened so they have the capacity to support the ambitious goal of creating a high-value economy, which requires considerable investment in emerging technologies.”

Rab said Uganda’s capital markets remain too narrow to play their full role in funding innovation.

“The investor base is dominated by a few banks and very few institutional investors. This needs to be broadened fast to aggregate savings and channel funds for investments in technology and other highly productive assets,” he said.

He cautioned against simply copying models from Wall Street or London, which he said prioritise speculative rather than real economic growth.

“Please don’t go for copy-paste from New York or London. That will not work for Uganda. New solutions, new mechanisms and new instruments are needed.”