U.S-based Financial services; Fitch Rating, has assigned Uganda Development Bank (UDB) a Long-Term Issuer Default rating (IDR) of B+ with a Stable Outlook.
A credit rating is an assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation. This can be assigned to any entity that seeks to borrow money including — an individual, corporation, state or provincial authority, or sovereign government.
UDB is Uganda’s primary development bank and its unique business model would be difficult to replicate by other domestic financial institutions. It is owned by government and overseen by the Ministry of Finance. The bank’s issuer default ratings are driven by its support rating and support rating floor of ‘4’ and ‘B+’ respectively. This reflects Fitch’s view of a high propensity of Ugandan authorities to support the bank in case of need.
Fitch Rating believes the sovereign funding guarantees that UDB receives will remain in place over the medium term. The bank’s policy role and strategic importance to the state is also evidenced by the government’s annual capital contributions, which have been committed until 2022.
Fitch Rating’s assessment makes consideration for the government’s ‘B+’/ Stable IDR. “The Stable Outlook on UDB’s Long-Term Issuer Default Rating mirrors that on the sovereign,” the credit rating agency highlights.
UDB Managing Director, Patricia Ojangole in a press statement said, the rating casts confidence in the institution in terms of their credit processes, governance and unwavering support from government.
“This process has provided our partners with an impartial opinion about the soundness of our business,” she noted.