Growth capital for BRAC Uganda Bank Ltd.
In Uganda, only about one third of the population has a bank account. Microfinance institutions can only close the gap to some extent. One of them, BRAC Uganda Microfinance Ltd., which focuses on providing finance to women in rural areas, has now received a Tier 2 licence to expand its banking business. DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH is supporting this step with equity capital of up to EUR4mn and will become a shareholder in the new BRAC Uganda Bank Ltd.
Besides the founding shareholder BRAC Holding International, other investors include Equator Capital Partners, a fund manager investing in financial inclusion, and the impact investor Triple Jump. Enclude Capital Advisory, a specialist impact investment bank owned by Palladium and long-time partner to BRAC, acted as the sole financial advisor.
Starting in 2006, BRAC Uganda has become the country's largest microfinance institution. It is part of the global non-governmental organisation BRAC, which was founded in Bangladesh in 1972 and now operates in 13 countries. Besides the focus on microfinance, BRAC is also involved in the health, nutrition and education sectors.
Institution provides finance to women in rural areas
With 163 branches and 1,800 employees throughout the country, BRAC Uganda provides loans to more than 200,000 customers, primarily women from poorer sections of the population in rural areas. Loans average US$335mn and are mostly granted as group loans. The new licence will enable the institution to offer savings and deposits for its clients, expand its product range and in future offer services such as micro-insurance, financing for small and medium-sized enterprises and digital banking services as mobile payment.
New banking licence enables expansion of product range
"Through our investment, we are supporting a successful financial institution in its transformation into a regulated bank, enabling it to attract savings and deposits and to gain new customers with new products. At the same time, we are promoting greater participation of women in Uganda's economic life," said Monika Beck, member of the Management Board at DEG.
“Becoming a bank, we are now in a position to not only provide far greater value to the hundreds of thousands of clients that we already serve but to achieve greater financial inclusion in Uganda by serving many hundreds of thousands more who are outside of the formal financial system,” said Shameran Abed, Senior Director of BRAC’s Microfinance and Ultra-Poor Graduation programme.
As a new financial institution, BRAC Uganda Bank Ltd. is contributing to market development in Uganda and generating local income. The workforce is expected to continue growing over the next few years. Investment is also planned in IT systems, risk management and corporate governance, which DEG will support through its Business Support Services.
DEG's current portfolio in Uganda amounts to around EUR90mn. Next to the financial sector, the focus is on finance for renewable energy projects.
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