Uganda, through Uganda Development Bank [UDBL], has secured a $20 million loan from Africa Development Bank to support Ugandan SMEs. AfDB made the announcement through a press release.
“The African Development Bank has approved a US$20 million loan to the Uganda Development Bank Limited (UDBL),” wrote AfDB.
The funds are to offer long-term financing to Ugandan SMEs. This is due to a scarcity of financing options for them as many financial institutions regard them as risky.
According to AfDB, this loan will allow UDBL to “provide long-term funding to deserving” SMEs.
“It also reinforces its role as a national development bank in implementing Uganda’s National Development Plan and complementing the institution’s efforts to diversify its funding base and mobilize resources from external sources.”
Although UDBL's focus is to “enhance the country’s private sector development”, it has before funded only a few sectors.
“Historically, UDBL intervenes in the agriculture and agro-processing, hotel and tourism, education, health, and manufacturing sectors,” wrote AfDB.
Yet with this recent loan, the bank might explore other sectors. That's if you look at the set of objectives AfDB hopes UDBL will achieve with the loan.
Also read: Tunisia set to launch use of drones in agriculture pilot project supported by AfDB
Some of the objectives include advancing "the country’s financial inclusion, gender, and social welfare aspirations."
"It will further contribute towards the provision of quality and low-cost education and health services, helping to narrow the widening social and income gaps in the country."
This should be particularly of interest to any startups that are playing in the financial, education and health technology space.
The loan is structured in two formats; $15 million and $5 Million for 10 and 5 years respectively.
“The financial package comprises of a 10-year US$15 million Sovereign Guaranteed Line of Credit for on-lending to projects in various sectors and a US$5 million Non-Sovereign Line of Credit to support a financing program for SMEs.”
According to AfDB, “the [loan] facility aligns with the African Development Bank’s Uganda Country Strategic Paper (CSP) 2017-2021 and Financial Sector Strategy (2014-2019).”
Thus, AfDB hopes that this will “enhance the country’s private sector development as beneficiaries’ businesses and revenues grow, with the associated positive impact on government’s tax income.”
Earlier on this year, AfDB also approved a $30 Million towards supporting the Rwanda Innovation Fund.