UDB's growing contribution

𝗦𝗣𝗢𝗡𝗦𝗢𝗥𝗘𝗗

Q&A

Briefly tell us about Uganda Development Bank.
As Uganda celebrates 60 years of growth in the financial sector, Uganda Development Bank (UDB) continues to play a strategic role in financing investments that advance Uganda’s development agenda.

Speaking New Vision, Dr Patricia Ojangole, the Managing Director of Uganda Development Bank, discusses the Bank’s strategy, innovations and contribution to Uganda’s financial sector and broader economic transformation.

 How is the Bank contributing to the growth of Uganda's financial sector?

UDB is Uganda’s national development finance institution, with a mandate to catalyse sustainable private-sector growth through both financial and non-financial interventions.

On the financial side, UDB provides a range of debt-financing solutions including working capital, asset financing and term loans of up to 15 years, currently at an interest rate of 12%.

The Bank also provides equity financing, where it co-invests alongside business owners and subsequently divests from the investment over a period of up to 10 years.

The underlying principle is to enable enterprises to mature into commercially viable businesses that can sustain their investments independently.

Beyond financing, UDB provides a range of non-financial services, including project and programme development, project preparation, investor support, professional services and enterprise advisory services.

A good example is our incubation programme, through which we identify businesses with potential and support them to strengthen their management and operational capabilities.

This includes training in areas such as bookkeeping, corporate governance, formalisation and registration, among others.

The objective is to build the capacity and bankability of these enterprises so that they can ultimately access financing from UDB or other financial institutions.

UDB is wholly owned by the Government of Uganda and is capitalised by government. In addition, the Bank mobilises resources through strategic partnerships, including concessional lines of credit from development partners, which we subsequently channel into businesses and productive investments.

UDB contributes to Uganda’s financial-sector development in several important ways. First, we contribute to expanding the overall scale of private-sector credit.

Uganda’s private-sector credit currently stands at approximately sh30 trillion, while UDB has about sh1.9 trillion in direct lending to businesses.

In effect, the Bank is increasing the pool of long-term financing available to enterprises, enabling them to invest, expand their operations and contribute to economic growth.

Second, and perhaps more importantly, we contribute to the quality and allocation of private-sector credit.

It is not only the volume of credit that matters; where that credit is deployed has significant implications for economic transformation.

Of the approximately sh30 trillion in private-sector credit, which largely comes from commercial banking institutions, about 65% goes towards real estate, personal and housing loans, and trade in imported goods, while only about 12% goes to manufacturing and 12.3% to agriculture.

For Uganda to achieve its Tenfold Growth Strategy and realise a significantly larger and more productive economy, capital must increasingly flow into sectors capable of generating higher productivity, employment, exports and value addition.

These include agro-industrialisation, tourism, mineral development, science, technology and innovation, among others, in line with the National Development Plans.

This is where UDB has a particularly important role to play.

More than 75% of the Bank’s financing is directed towards primary agriculture, agro-processing and manufacturing.

The remaining approximately 25% goes towards other sectors like health, education, creatives, science and technology, tourism and infrastructure, including water for production, energy and other strategic infrastructure that supports industrial activity, trade and resilience within the agricultural sector.

Third, UDB is playing an increasingly important role in thought leadership and financial innovation.

The Bank has been an early mover in emerging areas of development finance.

A good example is green financing. UDB launched its Climate Finance Facility in 2023, positioning the institution at the forefront of financing investments that support climate resilience and a low-carbon transition.

Since then, we have seen growing participation from other institutions in the green-finance space.

This demonstrates the catalytic role of a development finance institution—not only providing capital but also helping to develop new financing models and markets that can subsequently be adopted and scaled across the financial sector.

What other initiatives are you promoting that will help Uganda achieve its tenfold growth strategy?

UDB is deliberately positioning itself to support the structural transformation envisaged under the National Development Plan IV and the Tenfold Growth Strategy.

One important area is financial technology and digital lending, particularly through our Agri-Connect initiative.

Agri-Connect is a digital lending solution through which UDB extends financing to smallholder farmers organised under Village Savings and Loan Associations, or VSLAs.

The solution enables VSLAs to access affordable, short-term seasonal financing digitally, tailored to agricultural cycles and designed to support agricultural value chains and agribusiness growth.

The entire process, from application and assessment to approval and disbursement, is conducted digitally, with funds deposited directly into farmers’ mobile wallets.

This enhances convenience, speed and transparency while significantly reducing the transaction costs traditionally associated with smallholder lending.

Through this model UDB on lends to smallholder formers using Ensibuuko platform at a subsidised rate of 5% per annum which enables farmers to access loans at 1.25% per month, equivalent to 15% per annum, on a reducing balance over six months, including a two-month grace period aligned to agricultural production cycles.

The model is significant because it brings together public development capital and private-sector technology to extend financing to underserved segments of the economy.

It reduces transaction costs by digitising the lending process and leverages the strong social and financial structures within VSLAs to improve risk management and loan recovery.

UDB initially piloted the initiative with approximately sh500m. Following the success of the pilot, we are looking at growing the capital injection and to scale the initiative across all regions of the country.

As a financial institution, what kind of financial inclusion products has UDB introduced to Ugandans?

Financial inclusion is an important component of UDB’s mandate.

One of our key interventions is the Special Programmes, which are designed to address financing and capacity gaps among traditionally underserved segments including Women, Youth and SMEs.

Under these programmes, eligible beneficiaries can access affordable and patient financing at concessional rates and with more flexible security and repayment arrangements.

For example, in appropriate circumstances, the Bank can work with entrepreneurs who hold untitled or customary land and support the formalisation and titling of that asset as part of the financing process.

Loan amounts range from sh50m to sh900m, with flexible repayment structures, grace periods and competitive interest rates of 12% per annum.

To date, UDB has financed SMEs and enterprises owned by women and youth to the tune of approximately sh68.4b, benefiting about 308 enterprises.

A second intervention is the digital financing model I have already mentioned. Through the VSLA-based fintech arrangement, UDB has financed approximately 665 VSLAs, benefiting about 53,428 farmers.

The third is our farmers’ cooperative financing model.

Under this approach, the Bank assesses a registered cooperative as a single entity and provides financing that the cooperative subsequently on-lends to its members.