Wednesday, May 24, 2006
The East African Development Bank is to start financing development programmes in partnership with the private sector.? At the bank’s governing council meeting held recently in Kampala, proposals to develop a variety of development finance products were unveiled. The East African Community member states have endorsed the bank board’s proposal to provide additional capital to strengthen its equity base and fund expanded operations.
The African Development Bank (ADB), which is a shareholder in EADB, has been financing development in the region through EADB.
Sesay Sheku, ADB’s resident representative in Tanzania, said during the governing council meeting, “EADB has the appropriate structures to reach East Africans at both national and regional levels, which helps our work here.”
Confidence in the bank’s capacity to provide development financing stems from its financial performance.
The bank made a net profit of $1.4 million in 2005, up from $200,000 in 2004, on the back of improved portfolio management.
In 2005, EADB approved $51.7 million, disbursed $40.4 million up from $29.13 in 2004 and its collections also increased from $45.6 million million in 2004 to $56.4 last year.
The balance sheet between 2004 and 2005 increased by 10 per cent from $205 million to $226 million respectively.
During last month’s regional heads of state summit in Arusha, EADB was directed to carry out reforms to transform itself into a leading agency to facilitate East African regional integration and development.
Among proposals endorsed was the establishment of a regional institution to promote housing development, according to a communiqu from the governing council meeting. The council reaffirmed its intentions to establish a capital venture fund to promote entrepreneurship.
Godfrey Tumusiime, director general of EADB said, “The capital venture fund will be $5 million initially and this will increase as time goes by; but we have not yet set the actual time for implementation.”
The council also endorsed a proposal to increase the bank’s equity fund in order to promote development of small and medium-size enterprises through long-term financing.
According to the bank’s five year strategic plan, released last year, it is expected that the equity fund will increase from $4 million to $10 million over the plan’s timeframe.
Dr Ezra Suruma, chairman of the governance council, who is Uganda’s Minister for Finance, Planning and Economic Development said, “With the bank’s experience in financing infrastructure projects in the region, particularly those that are amenable to private sector participation, the council observed that the bank is well placed to support investments in infrastructure development though co-financing and participation in syndications of financing large projects.”
In order to expand EADB’s trade finance operations, the bank plans to finance viable export deals of businessmen lacking in adequate export capital to compete internationally.
According to Roy Baguma of the EADB projects department, “This product will provide structured trade finance to exploit trade within and outside the East African region.”
He explained that EADB intends to co-finance import and export deals with commercial banks. This product was basically developed to increase the region’s international trade.