UGANDA – Uganda’s Centenary Rural Development Bank and Housing Finance Bank have secured a combined UShs 640 billion (US$164m) credit from the European Investment Bank for onward lending to private sector enterprises, with a focus on female borrowers and micro-enterprises in rural areas.
Centenary Bank secured UShs 426 billion (US$109m) while HFB received UShs 213 billion (US$54.5m).
The EIB’s investment into Centenary Bank is the largest ever microfinance credit to any country in the African, Caribbean, and Pacific (ACP) regions, the lender said.
The final beneficiaries shall be micro-entrepreneurs or microenterprises with fewer than 10 full-time employees.
The investment also aims at supporting lending to financially underserved entrepreneurs in rural areas as their businesses continue to recover from the COVID-19 pandemic. 60% of the funding will go to projects in rural areas outside the capital city of Kampala.
Centenary Bank plans to use at least 50% of the financing to support women-run or women-owned businesses, in line with the EIB’s 2x Challenge criteria and SheInvest initiative.
This development comes as the United Nations Capital Development Fund (UNCDF) Uganda business survey from 2020 shows that microfirms and female-led firms face the largest constraints, with 80% of firms reporting difficulties in access to capital.
Financial services uptake indicates that only 11% of firms have a bank loan or line of credit, a proportion that is less than half of the average of countries in sub-Saharan Africa.
Most micro- and small enterprises remain excluded from mainstream banking because the focus tends to be more on corporates and high net-worth individuals.
Centenary Bank Managing Director, Fabian Kasi said the new credit aligns with the lender’s strategy and reinforces its focus on growing its “mission-critical” portfolio, particularly by extending its financial inclusion agenda to the bottom of the pyramid by increasing access to credit in the areas of microfinance and agriculture lending.
“Currently we allocate 20% of the lending portfolio to agriculture,” he said during the credit signing agreement.
Kasi said the bank aims to issue 1.9 million loans to small growing businesses and microenterprises, with a specific focus on empowering 970,000 women or women-run businesses, and 1.17 million loans to microenterprises in rural areas.
EIB Head of the Regional Hub for East Africa, Edward Claessen, said the funding opportunity offered to lenders will go a long way in spurring the economic growth of Uganda.
This is not the first time that Centenary Bank has partnered with EIB. The lender, which is the country’s second-largest bank in Uganda in terms of assets behind Stanbic Bank, has since 2008 benefited from EIB’s investments of over UShs 260 billion (US$66.9m).
The lender has also benefited from the EIB’s technical assistance multiple times in the past, including increasing its outreach and training to refugee clients, improving its environmental and social guidelines, training its agricultural loan officers, and better supporting the bank’s smallholder customers.
Over the years, EIB, in partnership with various financial institutions in Uganda has provided over UShs 1.5 trillion (US$377.6m) to support private-sector businesses, targeting agriculture and gender equality.
The European lender has also provided technical assistance to local banks and microfinance institutions and their clients in a variety of areas including risk management, product development, environmental and social assessment, and financial literacy, among others.
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