The Independent Uganda: You get the Truth we Pay the Price
Kampala, Uganda | THE INDEPENDENT | Uganda Development Bank (UDB) has now been capitalised to the tune of 272 billion shillings, with the money expected to help reduce the cost of money for local entrepreneurs.
Speaking at the State of the Nation Address on Thursday, President Museveni said the “the high cost of capital remains a major challenge to the economy as a whole.”
“So far, we have capitalized UDB up to 272 billion Uganda shillings, of which 53billion Uganda shillings has been provided this financial year,” he said.
The President said, “Next financial year, 2019/20, the government is providing an additional 103 billion Uganda shillings to bring the total to 375 billion Uganda shillings.”
The idea to capitalize UDB was mooted in 2015 State of the Nation Address when he said he had been deceived that selling government bank – Uganda Commercial Bank – would lead to low-interest rates.
It was all a lie, he said then. And since, the process to capitalize UDB has been on-going and the government’s planned application to the tune of 500billion Uganda shillings.
Museveni said the government has guaranteed loans of USD 15 million and USD 5 million from African Development Bank (AfDB) and Exim Bank of India, respectively for SMEs.
“We should borrow less domestically because of this increases interest rates and crowds out the private sector when Government domestic borrowing is excessive,” he said.
The prime lending rates in the commercial banks at 20%, too expensive for any borrower in an economy where the average return on investment is 8%.Even when UDB has been fully capitalized, it is not a guarantee that most entrepreneurs will access this money.
Smallholder farmers, where most Ugandans are, may not have the courage to look for this money. Also, analysts have said the 500 billion shillings capitalization is too small to meet the need.
On the cost of doing business, Museveni acknowledged it remains high. As in previous addresses, Museveni said the government will continue to prioritize infrastructure investment in Energy, Transport, water, and ICT.
“The cost of electricity per unit used to be US cents 10.62; it is now US cents 7.91per unit,” he said. “I intend to bring it down to US cents 5 per kilowatt hour for manufacturing.”
Even at that rate, electricity is still expensive for many companies. For some of the smaller companies, it is cheaper to use firewood than switching on electricity.
*****
URN
How does some one access a loan from UDB
The one that the government says it gives to business people at a low interest