Government moves to strengthen UDB capital base

Government has approved an additional allocation of Shs 63 billion in capital towards Uganda Development Bank (UDB) and raised the bank’s authorised share capital to Shs 5 trillion from Shs 2 trillion as it seeks to expand access to cheaper credit for local businesses.

The move, announced by Finance minister Henry Musasizi during UDB’s annual general meeting recently, came as the bank reported a strong performance in 2025, including Shs 502.2 billion in loan disbursements and the creation and maintenance of 69,202 jobs in the year under review.

Musasizi said the Shs 63 billion would come from UDB’s 2025 profit after tax, which the government has authorised the bank to retain as additional capital. He said strengthening UDB’s capital base was critical in enabling the bank to provide affordable long-term financing to businesses in sectors considered central to Uganda’s economic transformation.

“Our goal is to have a strong bank. The strength of the bank is measured in the capital base. So, we want a strong bank, which is able to provide cheap credit to our people,” Musasizi said.

UDB currently lends at an interest rate of about 12 per cent, but the minister said government wants the rate reduced to below 10 per cent in the medium term.

“For now, they are at 12 per cent. We would wish to see them come to 10 per cent and then eventually the single-digit interest rate,” he said.

The 12 per cent is still lower than the average 18 per cent that commercial banks charge. The government’s intervention is expected to strengthen UDB’s ability to finance businesses in manufacturing, agro-industrialisation, tourism, mineral development and other priority areas under the National Development Plan IV and the government’s Ten-Fold Growth Strategy, which aims to see Uganda become a $500 billion economy by 2040.

Musasizi said government was particularly interested in ensuring that enterprises in manufacturing, agro-processing and tourism can access long-term financing at rates lower than those available from commercial banks.

The minister also pointed to UDB’s growing reach beyond Kampala, noting that the bank has been expanding its presence in regional areas to make development finance more accessible to businesses across the country. UDB has also introduced financing programmes targeting small and medium enterprises, youth and women entrepreneurs.

UDB Managing Director Dr Patricia Ojangole said the bank’s performance reflected an increasingly supportive operating environment, including government capitalisation and growing demand for development finance as the economy expands.

She said between 65 per cent and 70 per cent of UDB’s loan approvals and disbursements go to agriculture, commercial agriculture, manufacturing and industry.

“That, for me, speaks to the economic realities in the country,” Ojangole said.

She added that the bank had maintained its non-performing loans within its risk parameters, with the loan loss ratio being below 6.7 per cent.

Ojangole said UDB’s ability to mobilise additional capital had also been strengthened by increased confidence from government shareholders and international development finance partners. However, she said mobilising funds must be matched with the bank’s ability to deploy them effectively.

“The best way to mobilise is to deploy,” Ojangole said, explaining that external funders assess UDB’s pipeline, strategy and previous lending performance before committing additional resources.

The bank’s 2025 results show total assets grew by 27 per cent to Shs2.26 trillion, while net loans and advances increased by 6.6 per cent to Shs 1.63 trillion. UDB recorded a post-tax profit of Shs 63.4 billion, representing a 9.7 per cent increase from 2024.

The bank said its supported enterprises created and maintained 69,202 jobs during the year, a 24.6 per cent increase from the year 2024. Ojangole said the figure was based on jobs that the bank had gone back to verify rather than estimates.

“The number that we have reported in this annual report – 69,000 jobs – is actual jobs that we went back to check, to confirm, to evaluate, and we can confirm that the jobs are there,” she said.

Musasizi said government expects UDB to improve its efficiency and expand lending as demand for development finance remains high. He said government had provided several mechanisms to strengthen the bank’s capacity, including annual capital allocations, allowing UDB to retain profits and providing guarantees that enable it to access external financing.

“We want to continue to improve. We want to do things better. We want to reduce the cost of borrowing so that we are able to respond to the needs of our people,” he said.

Musasizi said the government’s wider strategy was to support the private sector through interventions aimed at lowering the cost of credit, electricity and transport. He said UDB’s role was particularly important because commercial lenders do not always provide the long-term and affordable financing required for productive investments.

Ojangole said the bank would continue mobilising capital to meet growing demand, while ensuring that funds are channelled into productive investments capable of generating employment, increasing exports and expanding domestic production.

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