February 14, 2019—Fitch Ratings, one of the world’s ‘Big Three’ credit ratings agencies, has given Uganda Development Bank Limited (UDBL) a favourable appraisal for the foreseeable future.
Fitch recently assigned the government-owned financial institution a Long-Term Issuer Default rating (IDR) of B+ with a Stable Outlook.
Patricia Ojangole, the UDBL Managing Director UDB said yesterday, “This rating casts confidence in the institution in terms of our credit processes, governance and unwavering support from government, this process has provided our partners with an impartial opinion about the soundness of our business.”
Fitch Rating believes the sovereign funding guarantees that UDB receives will remain in place over the medium term. The bank’s policy role and strategic importance to the state is also evidenced by the government’s annual capital contributions, which have been committed until 2022.
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.
The latest rating reflects the Fitch view of a high propensity of Ugandan authorities to support the bank in case of need. Three main reasons explain this assessment beginning with UDB’s important, longstanding and clearly defined policy role in financing the country’s priority sectors as part of the bank’s mandate of contributing to economic growth and social development. Secondly, UDB’s 100% state-ownership and finally the significant funding guarantees and ordinary capital contributions provided by the state.
Uganda Development Bank Limited is a member of the The Association of African Development Finance Institutions (AADFI) and therefore adopted the Prudential Standards, Guidelines and Rating System (PSGRS) by which members assess themselves to the standards and guidelines for Development Finance Institutions across Africa.
Overseen by the Ministry of Finance, the UDBL unique business model would be difficult to replicate by other domestic financial institutions.
UDBL is the government’s main financial source for intervention to provide innovative solutions with emphasis on value chain development in areas including primary agriculture, agro-industrialization, manufacturing, infrastructure, tourism and hospitality, human capital development and minerals, oil and gas.