dfcu Bank

Investees | Uganda | dfcu bank
Dfcu Limited (“Dfcu”) was established in 1964 as a development finance institution. Dfcu is now the holding company of Dfcu Bank Limited (“Dfcu Bank”) and is listed on the Uganda Securities Exchange. The bank is regulated by the Bank of Uganda and came into existence in May 2000 following Dfcu’s acquisition of Gold Trust Bank to extend universal banking services.

Our initial stake of 55% in Dfcu Limited (“Dfcu”) was acquired from our shareholders at the time Arise was formed. In 2017, Dfcu Bank acquired some assets and liabilities of Crane Bank Limited (under administration) from the Bank of Uganda. To complete the acquisition, we provided Dfcu with a USD 50mn bridge loan to capitalise the bank. Subsequently, USD 35mn of the bridge loan was converted by a rights issue by Dfcu, and as a result, our shareholding increased to 58.7%.
Country Overview

Uganda is a landlocked country in East Africa with a population of approximately 45 million people. The country has a diverse economy, with agriculture, services, and industry being the major sectors. Uganda’s GDP was estimated to be around USD 33.7bn in 2020, with a growth rate of 3.3%. The country has seen steady economic growth in recent years, averaging about 6% yearly since 2016. Agriculture is the backbone of Uganda’s economy, employing over 70% of the population and contributing over 20% of the country’s GDP.

The major crops grown in Uganda include coffee, tea, cotton, maize, beans, and bananas. The country is also a significant exporter of coffee and tea. The service sector is the largest contributor to Uganda’s GDP, accounting for over 50% of the country’s economy. The major sub-sectors include tourism, financial services, and telecommunications. The food processing, textiles, and chemicals industries account for around 25% of Uganda’s GDP. The country also has a growing oil sector.

Banking Sector Overview

Uganda’s banking sector comprises commercial banks, microfinance institutions, credit institutions, and other financial institutions. The industry is regulated by the Bank of Uganda. According to data from the Bank of Uganda, as of September 2021, 24 licensed commercial banks were operating in the country. These banks had a total asset base of UGX 35.9tn (approximately USD 9.4bn) and total deposits of UGX 27.7tn (approximately USD 7.3bn).

The banking sector’s non-performing loan (NPL) ratio stood at 5.3% as of September 2021, slightly higher than the 4.8% recorded in the same period in 2020. The increase in NPLs is attributed to the effects of the COVID-19 pandemic on the economy, which has resulted in reduced business activity and increased credit risk.

In terms of profitability, the banking sector recorded an after-tax profit of UGX 496.5bn (approximately USD 130.5mn) in the first half of 2021, compared to UGX 388.3bn (approximately USD 102mn) recorded in the same period in 2020.

The government of Uganda has implemented various policies to promote financial inclusion and expand access to banking services, particularly in rural areas. This has led to increased competition among financial institutions and improved access to financial services. Overall, the banking sector in Uganda remains stable and is expected to continue growing, supported by a stable political environment and a robust economy.