Annual Report | Uganda Development Bank Ltd

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Annual Report | Uganda Development Bank Ltd 2019 ANNUAL REPORT | UGANDA DEVELOPMENT BANK LTD 2019 Annual Report Improving livelihoods of Ugandans i www.udbl.co.ug 2019 ANNUAL REPORT | UGANDA DEVELOPMENT BANK LTD Our Mandate “To operate as Uganda’s Development Finance Institution, particularly through interventions in priority sectors and in line with the Government of Uganda’s development priorities” Purpose Statement “To improve the Quality of Life of Ugandans” High Impact Goals Reduce Poverty Build a Industrialize in Uganda – Sustainable Food Uganda – Create Uplift 500,000 System in Uganda Ushs 4 trillion in people out of – Relieve 1,000,000 industrial output poverty by 2024. people out of by 2024. hunger by 2024. ii 2019 ANNUAL REPORT | UGANDA DEVELOPMENT BANK LTD Table of Contents Minister’s Company Governance Foreword Overview Pg30 Pg03 Pg09 Operating Sustainability Financial Environment Report Sustainability Pg59 Pg64 Pg107 Human Financial Capital Statements Pg113 Pg117 iii 2019 ANNUAL REPORT | UGANDA DEVELOPMENT BANK LTD Definitions Value of Output: This is the measure of total economic activity in the production of new goods and services in an accounting period for the UDB funded projects. It is a much broader measure of the economy than the gross domestic product (GDP), which is limited mainly to final output (finished goods and services). Tax contribution: Refers to the annual direct or indirect taxes paid by funded projects. These include corporation tax, PAYE, VAT (18%), customs taxes, etc. Foreign exchange earnings: Refers to the foreign currency generated by funded projects expressed in Uganda Shillings equivalent. The foreign currency generated includes earnings arising from the export of goods and services Jobs created and maintained: Refers to the total number of permanent and temporary workers employed by funded projects and are paid a wage or income. Profit for the year (Ushs): Annual income statement profit attributable to ordinary shareholders, minorities and preference shareholders. Earnings per share (Ushs): Earnings attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue Return on average assets (%): Earnings as a percentage of average total assets Net interest margin (%): Net interest income as a percentage of annual average total loans Yield on Loans (%): Total Interest Income as a percentage of annual average total loans Debt to Equity ratio (%): Total Debt as a percentage of Total Equity Net asset Impairment ratio (%): Provision for credit losses per the income statement as a percentage of closing net loans and advances Cost-to-income ratio (%): Operating expenses, excluding provisions for credit losses, as a percentage of total income. iv 2019 ANNUAL REPORT | UGANDA DEVELOPMENT BANK LTD Abbreviations and Acronyms AADFI - Association of African Development Finance Institutions ADFIMI - Association of National Development Finance Institutions in Member Countries of the Islamic Development Bank AfDB - African Development Bank AGM - Annual General Meeting BADEA - Arab Bank for Economic Development in African BARC - Board Audit and Risk Committee BCC - Board Credit Committee BSPC - Board Strategic Planning Committee DFI - Development Finance Institution E&S - Environmental and Social Management Framework EOSD - European Organization for Sustainable Development ERM - Enterprise Risk Management EU - European Union EVP - Employee Value Proposition EXCO - Executive Committee GCF - Green Climate Fund GDP - Gross Domestic Product GRI - Global Reporting Initiatives IDB - Islamic Development Bank IFRS - International Finance Reporting Standards MD - Managing Director MoU - Memorandum of Understanding NAADS - National Agricultural Advisory Services NARO - National Agricultural Research Organization NDP - National Development Plan NPA - National Planning Authority PSC - Private Sector Credit SDG - Sustainable Development Goals SME - Small and Medium Enterprise UBA - Uganda Bankers Association UDB - Uganda Development Bank Limited UNCDF - United Nations Capital Development Fund USHS - Uganda Shillings 1 2019 ANNUAL REPORT | UGANDA DEVELOPMENT BANK LTD Foreword from The Minister of Finance, Planning and Economic Development Strategic Plan 2020-24 addresses these emerging issues and is aligned to the aspirations of Uganda’s Third National Development Plan (NDPIII), the global Sustainable Development Goals, and the Paris Agreement on Climate Change. We are confident that the five-year strategy will guide the Bank in supporting the Government’s effort towards resource-based industrialization as a means of promoting inclusive growth and building a strong and sustainable economy. As, Government and shareholders, we want to renew our strong resolve to support UDB effort through increased capital injection and good stewardship. As I conclude, I wish to recognize the valuable contribution made by the Bank’s Board of The 2019 Annual Report of for the year, notwithstanding Directors who has provided Uganda Development Bank (UDB) challenges in the global excellent support and guidance is published in accordance with environment; dominated by to management. I would also section 132 of the Company uncertainty and downside risks. like to appreciate the Bank’s Act 2012. The report provides a The global economy recorded customers, financiers, and summary of the operations and its lowest growth of the decade other stakeholders for the audited financial statements of in 2019, falling from 3.2% in 2018 trust, confidence and active the Bank for the year ended 31 to 2.3% as a result of protracted contribution and look forward to December 2019. trade disputes, high policy their continued support. uncertainty and a slowdown in The performance results Finally, let me record my domestic investment. presented in the report profound appreciation for the demonstrates UDB’s commitment Issues such as poverty & sincere and unstinted efforts put to sustain its renewed business vulnerability, digitization, rising in by the Bank’s Management and model and ability to continue inequality, climate change, Staff. to deliver both financial results growing environmental pressures, and solid socio-economic changing demographics and impact results. The Bank was youth unemployment continue successful in implementing its to present challenges and Matia Kasaija 2019 strategies and, in general, opportunities to the economy. achieved its intended objectives The Bank’s recently revised 2 2019 ANNUAL REPORT | UGANDA DEVELOPMENT BANK LTD Key Priority Sectors TOURISM AND HOSPITALITY The Bank finances projects in the tourism sector geared towards enhancing INFRASTRUCTURE the number of tourist arrivals and AGRICULTURE The Bank offers creating a memorable INDUSTRY financial support experience for for infrastructural The Bank has tourists. Funding HUMAN CAPITAL The Bank development dedicated lines focuses on tourism DEVELOPMENT supports feasible extended to of credit at infrastructure such projects in the majorly local concessional as the development manufacturing content projects, terms for primary of accommodation Human Capital and agro- exploitation production, facilities in game Development processing of abundant processing and parks and other relates to sectors on renewable energy value addition in tourist destinations, increasing the competitive sources among agriculture. ecological sites, stock of a skilled terms. others. museums, heritage and healthy sites/cultural workforce centres, tourist to enhance stopovers, purchase production. This of specialized tourist encompasses the 1 transport facilities 3 sectors of Health 5 and equipment and Education. among others. 2 4 3 2019 ANNUAL REPORT | UGANDA DEVELOPMENT BANK LTD The Bank’s Product Portfolio 1 3 Short Term Loans Long Term Loans These are facilities with a tenure of 1 to 3 These are facilities with a tenure between 5 years. They are typically for the working capital and 15 years. They are typically projects with requirements of a qualifying business. More a large capital expenditure component to be specifically, they are intended to facilitate implemented over a relatively long period. Long key operational requirements that directly term loans are suited for large scale projects aid production such as the purchase of raw such as infrastructural development and others. materials and productive inputs. They normally Loan terms vary from project to project, complement a running or new project loan depending on the nature of the business. and are disbursed when the project is ready A grace period of up to 36 months may to commence operations, but stand-alone be considered and is determined by the facilities can also be considered. implementation schedule and project cash Short term loans may also be used to acquire flows. assets that can generate enough cash flows to service the loan over a tenure not exceeding 3 years. The facility may be accessed by both existing and greenfield projects. Loan terms vary from project to project, 4 Asset Finance depending on the nature of the business. The exact length of the tenure is determined by the project cash flows and the implementation The Bank facilitates the acquisition of schedule qualifying assets that aid production and/ or value addition in key sectors. The asset is the primary security for the financing. UDB undertakes to meet 80% of the asset cost and the borrower contributes 20%. The borrower 2 pays back over an agreeable period, ranging Medium-Term Loans from 3 to 8 years. A borrower can provide additional security as an alternative to the 20% These
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