Julius Barigaba
5 October 2008
Nairobi — The PTA Bank will keep away from venture capital as well as financing of small and medium enterprises, officials said at the bank's 24th board of governors annual general meeting, hosted by Kampala.
The bank, with a projected capitalisation of $2 billion, however, will increase its lending to other financial institutions within the PTA member states that are active in SME lending.
According to Uganda's Finance Minister Dr Ezra Suruma, the bank now wants to focus on critical project loans and trade financing to ease regional integration and improve access to international markets.
Dr Suruma is taking over the chair of the board for the next 12 months. He will be steering the largest financial institution in the region.
"In order to ease credit constraints related to access to international markets, the bank now has an additional strategic objective for the provision of finance to the private sector," said Dr Suruma.
"As we have seen the positive impact the bank can have on regional development activities through provision of adequate and affordable credit. The critical role of such a regional financial institution in providing credit amid the current credit squeeze in many parts of the world need not be reemphasised," he added.
In 2007, the bank approved a total of 29 projects for financing to a total of $169 million, with Uganda receiving $35.7 million, or about 22 per cent, to fund projects in aviation, agroprocessing, manufacturing and pharmaceuticals.
"The bank plans to continue to ensure that disbursements of trade finance improve to match what has been approved," said Dr Suruma, adding that PTA Bank can become the driver of export business in the region, providing affordable long-term loans that commercial banks may find too large to organise.
Michael Gondwe, president of the regional bank, said it will increase its funding for Ugandan projects.
Over the past two decades, the bank has cumulatively extended over $3.5 billion to various businesses in its 17 member states.
The bulk of its funding currently comes from the African Development Bank, which at the beginning of this year extended a financing package of $98.6 million in the form of credit and equity participation in line with the shareholders' decision last year to increase the bank's capital base to $2 billion.
And following consultations that started in Beijing at the Africa-China Summit in 2006, the China Development Bank -- a non Comesa member of the PTA Bank -- extended a $50 million line of credit in August this year to support mainly telecommunications and infrastructure projects in Comesa member states of Burundi, the Comoros, Djibouti, Egypt, Ethiopia, Eritrea, Kenya, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Tanzania, Uganda, Zambia and Zimbabwe.
But outgoing chair Mohit Dhoorundhur of Mauritius warned that although Africa's financial markets may survive the current financial turmoil in the West, the PTA Bank must undertake reforms using the lower trade barriers and improve flow of goods, services, capital and labour within the region.
"No one has the right answer. Yet the cost of being late in taking appropriate measures will not just be inconvenient," warned Mr Dhoorundhur, adding that member states must pay up their dues to lift the bank's capital base to the agreed $2 billion to facilitate faster reforms in the region as planned by January 2009.
He cited his country, which has already paid one instalment of its share of over $3 million as well as the AfDB, which has already signed on and is ready to contribute its share.
According to Mr Gondwe, PTA Bank provides financing ranging from $300,000 to $20 million, although these figures can be reviewed as appropriate depending on individual business requirements.
The 24-year-old institution last year saw its profits rise 45 per cent from $4.57 million to $6.65 million, due to increased loan disbursement and revenue generated from fees and commissions.
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