UDB dominates govt loan guarantees, Parliament told

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Uganda Development Bank (UDB) has been ranked as the biggest beneficiary of all government guarantees, holding seven guarantees out of ten.

According to a list of government guarantees as of May 5, 2025, tabled in Parliament, the only other beneficiary is the Islamic University in Uganda.

Government guarantees are assurances a national government provides to underwrite financial liabilities, essentially acting as a backup for repayment or performance if the primary obligor defaults. They can be used to reduce risk and encourage private sector investment in projects where government backing is needed.

According to the list, the number of guarantees previously stood at 12, but this has decreased to 10 after two guarantees, worth $20m, were paid off. The repaid loans were $10m from the International Islamic Trade Finance Corporation and $10m from the Arab Bank for Economic Development in Africa.

Finance state minister Henry Musasizi said in a statement to Parliament that the guaranteed debt portfolio fell to $100m by the end of 2024, down from $120m in 2023.

“Government’s disbursed and outstanding guaranteed debt reduced by 15% from $56.1m in 2023 to 2025. The ratio of guaranteed debt to GDP remained stable at 0.12%, well below the 5% threshold established by guidelines for the management of contingent liability,” Musasizi said.

In March, Parliament gave government the go-ahead to borrow $150m (about sh550b) from the Arab Bank for Economic Development in Africa (BADEA) and $25m (about sh91.6b) from the OPEC Fund for International Development to capitalise Uganda Development Bank Limited (UDBL).

The MPs also authorised government to guarantee UDBL to borrow up to $40m (sh146.6b) from the Islamic Development Bank, $30m (about sh110b) from the Islamic Corporation for the Development of the Private Sector, and $30m (about sh110b) from the International Islamic Trade Finance Corporation.

Musasizi, while tabling the request in Parliament, said the loan was crucial in providing affordable long-term capital to borrowers, particularly as UDB continues to play a central role in financing the country’s economic development.

He said UDB’s funding needs had increased over the past two years, with the bank now disbursing an average of sh1 trillion annually in new loans.

This growth, he noted, was driven by Uganda’s economic expansion, a rising number of business developments, and UDB’s competitive lending terms.

“UDB is the only financial institution offering long-term capital at a minimum interest rate of 12% per annum, with loan terms stretching up to 15 years,” Musasizi said. “This makes it uniquely positioned to support Uganda’s businesses with the affordable, long-term financing they require,” he said.

But MP Hassan Kirumira (NUP, Katikamu County South) proposed that the President’s proposed loan interest of 12% per annum from UDB be reduced further to less than 10% per annum to enable all Ugandans to access credit facilities.

“The committee also needs to visit the UDB project beneficiaries to ascertain the exact impact of these loans on the wanainchi,” Kirumira added.

MPs Godfrey Onzima (Aringa North), Geofrey Ekanya (Tororo North) and Fredric Angura (Tororo South) asked government to regionalise the Bank to allow businesses upcountry to benefit from the funds.

“The Bank is currently centralised in Kampala, but if we want it to serve more people and have a national face, we should regionalise it. For now, it seems the bank serves a certain specific group of people,” Onzima said.