Kampala, 1st August 2023: Uganda Development Bank (UBD) the country’s national development finance Institution has been assigned a National Long-term Rating of ‘AAA (uga)’ with a Stable Outlook, the highest attainable on Uganda’s national scale.
Assigned by Fitch Ratings, a world-renowned international credit rating agency, the Bank was also assigned a Long-Term Issuer Default Rating (IDR) of ‘B+’ with a negative outlook, the same pegged against Uganda’s Sovereign rating, given that the Bank is wholly owned by the Government.
“The ‘AAA (uga)’ rating by Fitch is a testament to the Bank’s robust institutional health and lends credence to the overall sustainability of the Bank. We are grateful to our various stakeholders, but more especially the Ugandan government, for the ongoing support that ensures the Bank continues to deliver its mandate” UDB Managing Director, Patricia Ojangole said during the press announcement held at the UDB offices today.
“Achieving the national highest possible rating is a true testament to the Bank’s sound financial health in meeting its current and future obligations to lenders while fulfilling its policy mandate to support the key sectors of the economy with significant potential to deliver socio-economic development.”
Fitch conducts a comprehensive assessment of a participating institution against a common set of parameters, following from which, it assigns a credit rating. Investors use these credit ratings as a guide as to which investments will not default and subsequently yield a solid return. Fitch bases its ratings on factors, such as what kind of debt a company holds and how sensitive it is to systemic changes like interest rates. A credit rating is therefore an assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation.
For UDB, as is the case for many other Development Finance Institutions in the world, a credit rating is a vital tool in enabling its funding partners to assess its relative buoyancy. Among the key rating drivers was UDB’s important policy role as Uganda’s primary development bank.
Also, the Bank lends on preferential terms to borrowers in strategically important sectors of the economy, in particular agriculture, agro-processing, and manufacturing, is funded predominantly by shareholder equity in addition to relatively low-priced borrowings that are mostly government-guaranteed and lends to potentially riskier sectors that are underserved by other financial institutions. Additionally, the Bank is financially sustainable with annual operating returns on assets averaging 4.5% between 2019-2022.
“What this rating means for us is that UDB can potentially access funding from multi-lateral funders at relatively lower rates; this is because investors can accept lower lending rates to entities that present with lower risk of default. Additionally, it means the Bank can access a wider audience of funders with greater ease and confidence,” Ojangole says.
UDB recognizes the efforts of the Government, the Ministry of Finance, among other stakeholders who have been instrumental towards the Bank’s growth and the support that has been rendered over time.
“We commit to identifying opportunities where we can transform the lives of Ugandans by supporting projects that are purposed to improve the quality of life across Uganda, as well as the country’s socio-economic agenda,” Ojangole, concluded.
A credit rating is an assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money — an individual, corporation, state or provincial authority, or sovereign government.
Uganda Development Bank Limited (UDB) is the country’s national Development Finance Institution (DFI) with a mandate to accelerate socio-economic development in Uganda through sustainable financial interventions. Consistent with this mandate, the Bank supports projects within the private sector that demonstrate the potential to deliver high socio-economic value, in terms of job creation, improved production output, tax contribution, and foreign exchange generation, among other outcomes. These projects fall within the key priority sectors of our economy and are in line with Uganda’s development priorities.
Uganda Development Bank (UDB) aligns its sector priorities with National Development Plan III (NDP III), focusing on Primary Agriculture, Industry (to include agro-industrialization, manufacturing, knowledge-based industries, and extractives), and Services (health, tourism, and hospitality, education, science, technology, and innovation) and Infrastructure. Agriculture, agro-industry, and manufacturing constitute about 75% of the Bank’s portfolio in alignment with the government focus under NDP III and Vision 2040.