Banks seek to establish Shs 1 trillion export credit facility

The banks are at an advanced stage of launching a 1 trillion shillings export credit facility to support manufacturers involved in exporting in East Africa.
The move, championed by the Uganda Bankers Association (UBA), aims to fund manufacturers who are increasing Ugandan products in regional markets.
Speaking at the Fifth Annual Bankers Conference in Kampala earlier this week, Ms Sarah Arapta, UBA Chair and Citibank Chief Executive, said: “We are currently working on a regional credit facility at specially structured and customized export up to Shs 1 trillion. to support industrialists involved in regional export.
The facility, she said, seeks to fill existing gaps, facilitate production and provide funds to fuel the entrepreneurial ecosystem by fostering growth and harnessing spin-offs.
However, Ms. Arapta also noted that as bankers, there is a need to review fiscal policies that limit the inflow of private capital, fast truck legislation that allows the banking and financial sector to grow and attract alternative sources and mechanisms to supplement traditional bank financing.
Ugandan businesses continue to face difficulties in raising credit to expand, with available facilities being costly due to repayment risks.
Ms. Arapta also noted the need to cultivate a good borrowing and repayment culture to attract alternative finance that takes into account the environmental, social and governance issues that are now central to the flow and sustainability of any company. The Permanent Secretary of the Ministry of Commerce, Geraldine Ssali, said that although there are business opportunities in the region, Ugandan manufacturers continue to face costly financing, which cannot guarantee the sustainability of the business.
“We have a big market in DR Congo,” she said, noting that under such circumstances, the export credit facility will be a game-changer and should boost trade.
Currently, there is only one dedicated credit facility – the Agricultural Credit Facility – under which participating commercial banks lend to agriculture-related activities.
Mr. Daniel Birungi, Executive Director of the Uganda Manufacturers Association, said that given the current lending structure, which is largely short-term and characterized by high interest rates, it cannot support a sustainable manufacturing.
Banks, he said, provide short-term credit of three to five years, which is not sustainable financing for manufacturing that takes before it can pay off.
“Sustainable manufacturing needs 10 years of credit, especially for [some sectors such as] steel and iron processing,” he said.
During the same meeting, Dr. Hippolyte Fofack, Chief Economist of the Export-Import Bank and Director of Research for the African Region, said that despite their enormous potential for economic transformation, the financing of industry manufacturing and tourism remains marginal.
In Uganda, the contribution of the manufacturing industry to the gross domestic product stands at 16.5%, which is not enough to transform the economy.
Growing share of exports
The export credit facility aims to finance companies that increase Ugandan products in regional markets.
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