Anne Juuko, the Managing Director and Chief Executive Officer of Stanbic Bank Uganda Limited has disclosed that banks in Uganda were changing their mindset and moving from demanding collateral to contract financing. 

Any Small and Medium Enterprise (SME) that gets a contract especially under the East Africa Crude Oil project will be able to access instant financing. 

She said that any company under the above category, after confirming and receiving a contract to supply goods or services, there will be no more need to present security.

“We are changing our mindset and we are going instead to contract financing, if you do have a contract, we will finance you as per that contract,” she stated, specifically referring to projects for local content. 

She assured the small private sector that Ugandan banks can finance and "will finance local content smaller size ticket contracts" without restrictions that require collateral. 

She told the Ugandan business community that the time is now.

“When it comes to the smaller projects, the projects that don’t require billions of dollars that are specifically for local content, we are ready and willing to finance them,” she said.
 
Juuko was Saturday, November 27, speaking to journalists after attending the first Tanzania Uganda Oil and Gas symposium at Serena Hotel, Dar es Salaam.

“The days of lending against collateral are gone, and in the Ugandan case, people may think of a piece of land or building for this kind of a project we are talking about, that could not be possible and it was asking for something we know is not there,” Juuko stated, adding that commercial banks were giving a new approach to financing SMEs, ‘so that the requirement for you to bring a piece of land or bring a building is no longer there, what we will do instead is to find a way to finance you against the contract that you have been awarded.

She added that for the case of Stanbic bank Uganda, if any business venture gets a contract in Tanzania and Uganda, "we will assess you as one entity and we will give you one credit limit, which you can apply on either side of the border". 

She said this was opposed to Stanbic Uganda providing a loan and the same company runs to the same bank in Tanzania for another loan.

"We will review the project as one and will give credit lines for the project as one and I think this is the message of this symposium,” she said.

She added, “This is one contract, though it may be cutting across borders, it remains the same contract.” 

Commenting about larger business enterprises, Juuko stated that it was a different "story altogether".

She cited an example Stanbic Uganda, in which she said that their single obligor limit was $70m, which meant that they could lend to a single project up to $70m.

“And that is using the Stanbic Uganda balance sheet alone if we add our East Africa balance sheet, and even the group balance sheet, the number goes up to several multiples,” she explained.

She said the commercial banks will be focusing on SMEs and the larger ones, whether pipeline, the refinery and the rest "have got to be financed differently and probably it will not be a single finance here, rather a syndicate combination of different sources of financing".

Juuko explained that according to the Bank of Uganda and Bank of Tanzania, a commercial bank was allowed to lend up to 25% of its core capital to a single borrower or obligor (maximum amount a bank is allowed to lend a single borrower or an individual in relation to the total shareholders’ fund of the bank).

“The single obligor limit for one project, like the refinery, all banks in Uganda if came together and wanted to lend to the refinery to their maximum capacity and to a single borrower, they can only raise up to $500m,” she said.

She said Tanzania was also not different and would also do the same and get about the same amount, $500m.

“In total, all banks in Uganda and Tanzania can only raise $1bn for a single project from a single obligor limit, but that is what is available,” she explained.

“The truth of the matter is that there are very few projects, at all, where all banks will come together to lend to their full maximum capacity. Already, that means that there is a deficiency from a capacity point of view. Admittedly at the deficit is that in our current construct, as the bankers of both countries, when you look at that and compared to the requirement, for example, the refinery alone is several billion, the pipeline is an approximation of 5bnUSD, all these projects put together, there is no single bank and all of us banks put together can finance,” she said.

She said this was the reason the lending institutions had taken the time at the symposium to explain in great detail that there was a need for a ‘new kind of thinking’.

“We must walk away from financing as we know it, so debt financing alone cannot cut it for oil and gas. What we need is a non-traditional source of funding, whether they are in the form of Export Credit Agencies, or development finance or pension funds or any other source of capital or even a combination of all of them,” she told the journalists.

 She said for the work to get the projects ready to access this kind of financing, "we must start now so that we don’t lose time". 

Juuko was also a panellist in a discussion on the ease of access to finance by small businesses held in Dar es Salaam during the Tanzania Uganda Oil and Gas Symposium, which was moderated by Olivia Byanyima.