The Hon. Minister of Finance and other Hon. Ministers Present.

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1 BANK OF UGANDA SPEECH BY PROFESSOR EMMANUEL TUMUSIIME MUTEBILE GOVERNOR BANK OF UGANDA AT THE OFFICIAL INTRODUCTION OF DFCU NEW SHAREHOLDER- RABOBANK AT THE SHERATON RWENZORI BALLROOM WEDNESDAY, JUNE 05, 2013

2 The Hon. Minister of Finance and other Hon. Ministers Present. Hon. Members of Parliament Your Excellencies the Ambassadors The Major Shareholders of DFCU Ltd. (CDC, Rabobank and Norfund) The Board of Directors, DFCU Bank, Senior Management and Staff of DFCU Bank, Ladies and Gentlemen, It is a great pleasure for me to join you in welcoming Rabobank to Uganda. Rabobank has made a major investment in Uganda s financial market through its acquisition of a 27.5 percent equity stake in DFCU Ltd, which is the parent company of DFCU Bank, Uganda s sixth largest commercial bank in terms of the size of its assets. This equity investment is a sign of Rabobank s confidence in both DFCU Bank and the wider Ugandan economy. DFCU Bank has a proven record of growth and profitability, allied to prudent financial management and a commitment to providing quality services to its customers. It has also expanded its branch network and introduced new products to the market. I would also like to commend the Norwegian Development Fund (Norfund) for having increased its own shareholding in DFCU Ltd, to 27.5 percent, from its previous level of 10 percent. The entry of Rabobank and the increase in Norfund s shareholding in DFCU Ltd was made possible by the sale of shares by the CDC Group. Although the CDC group has reduced its stake it still retains a significant 15 percent shareholding in DCFU Ltd. Page 2 of 5

3 DFCU Ltd has been operating in Uganda for half a century, having been established as a leasing company in the 1960s. It purchased a small bank in 2001, which was renamed DCFU Bank and which has subsequently expanded robustly. DFCU Bank has been restructured over the last decade and has absorbed the leasing operations of its parent. The divesture of the Government of Uganda s stake in DFCU Ltd through an Initial Public Offering paved way for the listing of its shares on the Uganda Securities Exchange. Rabobank s investment will provide valuable institutional expertise and financial backing for DFCU Ltd. In particular, Rabobank has substantial expertise in financing agricultural business and will offer this expertise to DFCU Bank to help it develop better business models for the agricultural sector in Uganda. To implement its agricultural financing operations, DFCU Bank intends to set up a new agricultural division within the bank. As such, Rabobank s entry into our market has the potential to make a vital contribution to one of the nation s strategic development priorities; the modernization of agriculture. Although the agricultural sector employs 60 percent of the country s workforce, it has not received the attention and support which it merits. As a consequence, the real growth of the agricultural sector has been very weak less than 2 percent per annum on average - for more than a decade. Labour productivity in agriculture is both very low and stagnant, reflecting the subsistence nature of much of the sector, especially in the food crop sub-sector. There is no intrinsic reason why agriculture in Uganda, which has some of the most fertile land in the world, should continue to stagnate, provided that we Page 3 of 5

4 implement a comprehensive strategy to modernize agriculture. Such a strategy must entail providing public goods and services to help smallholder farmers to raise their productivity by adapting good agricultural practices, including the appropriate use of purchased inputs, and to sell the bulk of their output on the market. We need to encourage smallholder farmers to shift from subsistence farming with low technology inputs to commercial farming with more modern inputs. The key public goods needed to support agricultural modernization are agricultural extension services and rural infrastructure such as feeder roads. Public goods must be supplied, or at least funded, by government. Alongside public goods, the modernization of agriculture also requires an increased supply of private goods, including inputs such as fertilizer and agricultural finance. These are the type of goods which are best supplied by the private sector through the market, rather than by government. Agricultural finance has an important contribution to make to agricultural modernization but it should be supplied through the market, using commercial principles; otherwise it will not be sustainable and scarce resources will not be allocated efficiently. As such, I warmly welcome the prospect of DFCU Bank, with the assistance of Rabobank, developing commercially viable financial services for Ugandan farmers. With these remarks, allow me once again congratulate the new shareholder Rabobank Group for its decision to invest in DFCU Ltd. I also wish to pay tribute to all the other shareholders as well as the Board and Senior Management of DFCU Bank Ltd. for their commitment to serve the people of Uganda. Page 4 of 5

5 Thank you very much. Prof. Emmanuel Tumusiime-Mutebile, Governor, Bank of Uganda Page 5 of 5