The Evolving Role Of National Development Banks

The Uganda Development Bank (UDB) recently convened a high-level meeting with prominent stakeholders on the sidelines of the International Monetary Fund (IMF) and World Bank spring meetings in Washington DC. The aim of this strategic engagement, which was led by UDB chairman Felix Okoboi and CEO Patricia Ojangole, was to foster partnerships, exchange insights on the evolving role of national development banks in Africa, and chart a course for UDBs transformation.

In his opening remarks Henry Musasizi, minister of state for finance, planning and economic development for Uganda, made a compelling case for greater government support for national development banks. Unlike commercial banks and private lenders, development banks have a longer-term investment horizon and lend at more competitive rates.

As a result of this important and complementarity role, these banks across the continent should be better equipped and better capitalised. Capitalisation of national development banks should be at least 10% of GDP. Uganda has demonstrated this by capitalising UDB to the extent that it is the most capitalised national development bank in the African continent. We pledge our continued support to help them achieve their purpose to transform the quality of life of Ugandans.

Musasizi observed that UDB has been instrumental in advancing the East African countrys economic goals, as outlined in the national development plan. By focusing on sectors often overlooked by private financial institutions, such as agriculture and agro-processing, UDB has positioned itself as a crucial facilitator of industrial growth and job creation. Moreover, UDBs commitment to providing not just financial support but also training and capacity building to aid clients with business development and project preparation reflects a holistic approach to economic empowerment.

He expressed confidence in UDBs ability to continue playing an enabling role as an agent of structural economic transformation in Uganda, citing sustained improvements in the Banks operations, financial performance, and governance structures as crucial underpins for continued success. Strong governance is critical for these national development banks to be able to engage with international actors, such as other continental development finance institutions (DFIs) as well as other actors, such as philanthropies and private sector players.

In light of this, the minister highlighted the work that UDB had done to provide comfort to international partners. UDB has consistently secured a triple-A national long-term rating with a stable rating by Fitch. It has achieved an A class rating from the Association of African DFIs and has the lowest cost-income ratio in the development banking sector in Africa.

Ojangole has been CEO of the bank for a little over a decade. She has seen its balance sheet increase more than ten-fold over this time. She welcomed the governments pledge of support, noting that the lender would not rest on its laurels but would speed up innovation in the face of a fast-changing business environment. The bank is on the right trajectory in terms of growth and were continuously innovating as the business environment is changing so fast. She mentioned several initiatives that the Bank is pursuing to stay ahead of the curve, including adopting gender-lens financing to close the gender equality gap and rolling out digital financing platforms to reach the unbanked.

She reaffirmed the Banks commitment to small and midsize enterprises (SMEs), noting that this was the sector with the greatest potential for impact in terms of job creation, economic growth and prosperity. We have a commitment to support underserved sectors such as SMEs. This is crucial as SMEs play a very critical role in the economy and constitute the largest percentage of our private sector.

Ojangole recognised the detrimental effects of climate change on critical sectors of Ugandas economy, particularly agriculture. The Bank has committed to allocating additional resources toward climate change mitigation and green financing in the years ahead, she disclosed.

In the ensuing panel discussion, Okoboi noted that national development banks aspiring to replicate the success of UDB needed to have an unrelenting commitment to good governance. When I look at any entity on our continent, the ones that fail are not necessarily the ones that cant access capital, but the ones with bad governance. Moreover, he drew a compelling connection between the governance practices of national development banks and the governments supporting them. The history of national development banks that have had bad governments shows that the banks have not performed.

Admassu Tadesse, group presiden