UBA this morning unveiled a special Regional Export Facility (REF) of an initial amount of Shs1 Trillion as a package to support exporters from Uganda, to regenerate & grow export volumes to regional markets.
The Uganda Bankers Association (UBA) has unveiled the regional export loan facility valued at Shs1Trn to be lent to exporters to enable them penetrate the regional markets.
While unveiling the facility at Serena Hotel Kampala today, Sarah Arapta, Chairperson of Uganda Bankers’ Association revealed that the initiative is in line with the Association’s commitment to promote domestic manufacturing, industrialization and development.
She said this followed a dialogue held in July 2022 between bankers and manufacturers that highlighted huge potential in manufacturing but also the immense opportunities in regional trade that is being hampered by lack of access to financing by the manufacturers.
“As a country, we have established a reasonably strong manufacturing sector with support and coordination from government and we can position ourselves as a trading hub in the regional market with numerous products to which we have a comparative advantage. The outbreak of the pandemic resulted into two years of regressive production and closure of borders which meant the supply was suffocated and access to raw materials curtailed,” Arapta said.
Arapta, who doubles as the Chief Executive Officer at Citi Bank Uganda, added that although markets opened after a two-year closure, businesses are still struggling which calls for new business development initiatives to restore markets locally and regionally.
“The core intervention under this framework is the de-risking of regional export markets with a specialized financing regime and payment structure between Uganda and export market to improve export trade,” added Arapta.
According to Wilbrod Owor, the Executive Director at Uganda Bankers’ Association, the facility will be up for use starting 1st November 2022 and the beneficiaries will pay an interest of 12% and there isn’t any minimum imposed on how much a manufacturer can borrow, with such a decision determined by the commercial banks who will do the appraisals.
However, borrowers who will apply for the loan facility in foreign currencies will be charged 6% interest rate per annum. All borrowers will be required to pay 0.5% in loan agreement fees and another sales fees of 0.15%.
Twinemanzi Tumubwaine, the Executive Director Supervision at the Bank of Uganda urged exporters not to only focus on markets in Europe, Asia and America but to start with regional markets in EAC and Africa that don’t have stringent standard requirements like is the case in the West.
“You don’t have to look for UK because whatever standards they are going to impose on you, even they themselves at the beginning never faced those standards, so you want to disadvantage yourself yet you already have an advantage, how about you start with your peers? I am not saying we shouldn’t have standards but why not start with those whose standards are still on the ground,” said Twinemanzi.
He also questioned why regional traders within the East African Community are making transactions in foreign currencies, saying if this practice isn’t curtailed, local currencies will remain weak.
“Why should a transaction between a farmer in Busia and a purchaser in Nairobi have to go through New York because you are using dollars? If you start trading in Uganda, Kenya, Tanzania shillings, my problems in monetary policy will reduce,” he said.
Jjemba Mulondo, the Deputy Spokesperson at Kampala Capital City Traders’ Association (KACITA) welcomed the facility, saying it will go a long way in saving traders and exporters from the exorbitant commercial bank rates and money lenders imposed on both manufacturers and traders within Uganda.
“Taxes don’t grow economies, taxes distort economies, we need to look into that area and see how much can be done to reduce on the taxes. Of recent we have had the poultry dealers in the country, they are up in arms against URA, it is no longer the usual subject of taxes for growth, this time it is like we are having taxes to drop the economy,” remarked Jjemba.
He also urged Government to facilitate regional trade by revising the tax policy and revamping both air and railway transport, saying the dependence on road and air transport has proved costly for exporters in Uganda.
