Why Uganda needs credit rating

The inclusion of external credit ratings outlined in Basel II (guidelines for banks set by an international banking committee) determines the credit risk assigned for each company, ranging from 20 to 150 percent. If a company doesn't have this rating, banks treat it as if it carries the highest level of risk.
African countries like Zimbabwe and Tanzania have realized the importance of having their own credit ratings to better understand how reliable local companies are.

The African Union also sees the need for this to avoid mistakes in rating African markets compared to others like the United States or the United Kingdom.
However, some credit rating agencies say they can't rate the African markets accurately because there's not enough information.
In Uganda, the push for national-scale credit ratings by entities like the Uganda Development Bank emphasizes the importance of implementing Basel II principles for market stability.

ICRA's footsteps in Africa, including accreditation by the Bank of Tanzania and recognition from the Bank of Uganda, showcase a growing need for comprehensive credit rating services in the region.
Additionally, partnerships with key institutions and chambers (Private Sector Foundation in Uganda “PSFU”) make ICRA even more reliable for making smart financial decisions in different areas.

The author, Joshua Laban Musinguzi is Head of Business Development at ICRA Uganda