Bankers launch Shs1 trillion export fund with 12% interest 

The facility will provide access to loans in both shilling and foreign currencies. Photo | File

What you need to know:

  • The Regional Export Facility will be available for businesses with an export element at an interest rate of 12 percent and 6 percent for shilling and foreign currency-denominated loans, respectively 

Bankers, under Uganda Bankers’ Association (UBA), have  launched a Shs1 trillion Regional Export Facility that seeks to support exporters within Uganda and the East African Region. 

The facility, which will be operationalised beginning November 1, will carry a 12 percent interest rate per annum for shilling-denominated loans and 6 percent from foreign currency-based loans.  

The Regional Export Facility is a framework through which financial sector stakeholders will support exporters to revive and grow export volumes to the regional markets including South Sudan, DRC, Rwanda, Burundi Tanzania and Kenya among others.

Speaking at the launch in Kampala yesterday, Mr Wilbrod Owor, the UBA executive director, said the facility was is being championed by financial institutions under UBA, development financial institutions and partners to support manufacturers and exporters in regional trade.

This, he noted, will also support growth of export volumes by de-risking regional export market to unlock market access.

The facility will also seek to support improvement of cross border export risks and will be critical in supporting recovery of businesses that mainly target regional markets. 

A number of businesses are struggling to shake off the devastating impact of Covid-19, exacerbated by the global supply constraints, contraction of markets and attendant cash flow issues, among others. 

Access to the money and the amount, Mr Owor said, will have no limit but will depend on the purpose and needs of the exporter, which will be appraised as key requirements of the facility. 

UBA also indicated that the facility will be available to individual exporters, SMEs, local corporate exporters and multinationals. 

“The facility will be used primarily to provide financial loans to export oriented businesses that have suffered financial distress arising from the effects of Covid-19 and can show potential for recovery,” Owor said. 

It will have a tenure of three months to five years, depending on the purpose and structure of the business with an annual interest of 12 percent and 6 percent for shilling and foreign currency-based loans, respectively. 

However, borrowers will be expected to possess sufficient collateral, whose adequacy will be determined in accordance with existing lending policies. 

Ms Sarah Arapta, the UBA chairperson and Citibank managing director, said in July, while holding the annual bankers’ conference, they had identified a missing link in financing the needs of manufacturers, among which included establishing an export financing mechanism that provides better priced facilities to support and manage export risks. 

“As a country we have established a reasonably strong manufacturing sector and with support & coordination from the government we can position ourselves as a trading hub serving the regional markets with numerous products for which we have comparative advantage,” she said, noting that Uganda has seen strong export growth for a number of goods, among which include cement, steel bars, iron sheets and paint in addition to fast moving consumer goods such as scholastic material and personal care products.

Interested       

According to Bank of Uganda executive director supervision Tumubweinee Twinemanzi, the Central Bank is interested in what will be charged as interest on the facility because it should be reasonable to support business into recovery. He also believes that beneficiaries should, apart from doing  paper documentation, must understand the terms under which the facility will be advanced. 

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