Establishment and Early Operations

The Uganda Development Bank Limited (UDB) was the first national development finance institution (DFI) in Uganda established under Decree No. 23 of 1972 (later the Uganda Development Bank Act Cap. 56 of 1972), which Act sought to “establish the Uganda Development Bank and the Credit Guarantee Fund and for other matters connected therewith”. The main objective of UDB was to promote and finance investment in various commercial sectors of the economy with particular emphasis on agriculture, industry, tourism, housing and commerce. In order to achieve its objective, UDB was empowered, by its statute, to provide financing in the form of loans and by way of equity participation using funds borrowed from both local and foreign sources. As per the decree that established it, UDB was required to finance projects that were technically feasible, commercially and economically viable and socially desirable. Priority was given to:

• Existing projects requiring small assistance to improve their operations.
• Projects with a scope to maximize utilization of the country’s resources and add value to local products.
• Projects aiming to produce quality products at internationally competitive prices targeted for export.
• Projects creating new job opportunities.

Backed by guarantees of the Government of Uganda, UDB succeeded in obtaining large credits from external financiers, notably African Development Bank, International Development Association, European Investment Bank, European Economic Community, Kuwait Fund, Organization of Petroleum Exporting Countries (OPEC Fund) and Arab Bank of Economic Development in Africa (BADEA). In 1993 under the Public Enterprise Reform and Divesture Act Cap. 98 an act to reform and divesture public enterprises, the Government of Uganda categorized UDB Class III under public enterprises in which Government would divest fully from its bid to privatize state-owned enterprises/entities. By 1997 at the end of its 25 years of operation, the bank had built up a loans portfolio in excess of US$170 million, all in the form of term loans, covering major industries in Uganda. The major industries financed by the bank included livestock, processing of fish, tea, coffee and cotton for export and manufacturing of sugar, cement, and various other industrial products.

Scope and Achievements of the Restructuring Exercise

Until 1997, when the restructuring programme commenced, UDB’s only activity was term lending with the purpose of financing business investment in the economy. All UDB’s activities were ceased as part of the restructuring programme i.e. no additional funds were disbursed on the outstanding loans nor were any new loans extended. As such, from 1997 to 2000, when the technical restructuring of the Bank was completed, the Bank concentrated on the recovery of outstanding loans, which portfolio was classified into performing and non-performing loans and this was done through the Non-Performing Assets Recovery Trust (NPART), a debt collection agency set up by the Government of Uganda under the Ministry of Finance.

In 2001, Government sanctioned the Bank to resume limited lending operations financed out of the Bank’s internally generated funds. The lending operations were initially restricted to existing customers and for a period not exceeding 2 years but over time adjusted for specific cases to periods ranging from 2 – 5 years. The Government decided to vest the mandate of UDB into the ambit of Uganda Development Bank Limited, a limited liability company wholly owned by the Government of Uganda (with equal shareholding of the Minister of Finance and Minister of State for Investment-formerly Minister of State for Privatization) on 31st May 2001. This was made operational in law under the Public Enterprise Reform & Divesture (Vesting of undertaking of UDB) Instrument of 2002. UDB currently operates under the scope of the Companies Act.