New UDB loan products expand options for youth, women

December 15, 2021 in Business, Financial Services, Policy by Editor

Patient lender Uganda Development Bank UDB, has launched ‘Special Programs,” a suite of loan products that eases access to capital and affordability of finance by SME’s and businesses serving or owned by youth and women.

The window features tailor-made loan products that allow businesses in the target segments to get quick access to affordable short-term working capital for growth or asset finance at tenures of up to six years and interest rates ranging between 10 and 12pc per annum.

Speaking during the launch, UDB Managing Director Patricia Ojangole said the products have been designed with the realization that youth and women are the most significant demographic in the Ugandan economy and. Unlocking their potential would catalyse economic growth and address unemployment, she added.

According to Ojangole, the bank has adopted a comprehensive approach that speaks to businesses needs for capital and finance as well as growth and survival.

“As a bank, we have taken the time to understand business, the challenges that we face as a country and the contribution we can make as an institution. We realised that besides access to finance and, businesses also face issues of sustainability. The solutions we have devised address all these to ensure that businesses survive and grow,” she said.

Mostly operating in Uganda’s informal sector, a lot of the target businesses cannot access funding because they are not registered. Working with the Uganda Registration Bureau and the Uganda Revenue Authority, UDB will help women and youth led businesses acquire formality through registration with partner institutions.

The loan products have also been structured in such a way that the eligibility criteria are aligned to the unique needs of small enterprises and youth or women-led businesses. These include lower loan thresholds with the minimum loanable amount now down to UGX 50 million while the upper limit has been raised to UGX720 million.

Under the SME Kazi loans, the bank defines a small enterprise as one with an annual turnover of up to UGX 100 million and a medium enterprise at UGX 360 million. Enterprises can either borrow money equivalent up to 1.5pc of their turnover, or up to 80pc of the value of their equity, to meet short-term working capital needs, trade or contract financing.

Through the asset finance facility, SME’s can acquire assets with the assets acting as collateral for loans up to UGX720 million at the debt-to-equity ratio of 90pc. Existing SME’s or startups that demonstrate a potential for expansion can be financed up to 80pc.

Youth with eligible startup projects can be financed 80pc to a maximum of UGX 300 million while the youth acceleration facility will support business expansion with loans up to UGX 540 million at a ration of 90pc debt and 10pc equity.

Eligibility will be determined by shareholding with youths owning more than 30pc in the candidate enterprise; by product such as enterprises involved in skilling the youth such as incubation hubs, where youth enrollment is higher than 50pc; or an enterprise that employs a minimum of 35pc youth.

Any business that is majority owned by women or where women constitute 30pc of the board or senior management, qualifies for women prosper loans to a tune of UGX900 million and tenures of 8 years.

Finance minister Matia Kasaijja who presided over the launch said the SME sector employs 8.5 million people, contributes 75pc of GDP and accounts for 80pc of the private sector. On the other hand, women make up 52.5pc of the labour force in Uganda.

“I am therefore happy that UDB is recognizing women as key partners in economic development,” Kasaijja said.

He called on stakeholders to look at ways of eliminating the legal impediments that disadvantage women. UDB’s intervention will help women led business to create economic opportunities, social impact and impact economic development, he said.