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Facts about Uganda

dfcu Bank’s experience in developing and growing a successful SME Bank Norfund Summer Conference Oslo, Norway By : Juma Kisaame Managing Director, dfcu Bank Thursday, 28 th August 2014. Land linked country of : 241,038 sq. km. Member of the East African Community, COMESA. Demographics:

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Facts about Uganda

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  1. dfcu Bank’s experience in developing and growing a successful SME BankNorfund Summer ConferenceOslo, NorwayBy:Juma KisaameManaging Director, dfcu BankThursday, 28th August 2014

  2. Land linked country of : 241,038 sq. km. • Member of the East African Community, COMESA. • Demographics: • Population: approx. 37m, with 60% below 22 years. • Urbanization at 16%, with over 75% engaged in Agric. • Potential spending power – growing Middle class • Stable macro economics policies/ liberalization. • Economic growth: 5.2% (FY13) and est. at 5.5% (FY 14). • Strong capital inflow; FY12 FDI: $ 1.2bn, high return. • Massive resource concentration: • Mineral deposits • Oil & gas – over 3.5 billion barrels. • Tourist attractions– natural, cultural sites. • Comparative advantage in Agriculture. Facts about Uganda

  3. 25 licensed commercial banks, 3 Microfinance deposit taking institutions (MDIs), and thousands of Microfinance Institutions/SACCOs. Commercial banks, MFIs and MDIs are regulated by the Bank of Uganda Strong regulatory environment (FIA 2004) Approx. 54% of the adult population have access to financial services, of which only 23% use formally regulated financial institutions. Stiff competition within and emergency of mobile money transfer services: of the adult population, 31% use MM services vs. 23% using formal FIs.. Shortage of long term funding for development projects. Nascent financial/capital markets. Source: Uganda 2013 FinScope III report, Bank of Uganda Overview of Uganda’s Banking Sector

  4. Key themes shaping the Banking sector • Financial inclusion: Outreach / financial literacy. • Innovation: Product differentiation & diversification. • Demographics and growing affluence • Digital revolution – convergence of banking and mobile money transfer services, internet banking, etc. • Tightening regulatory framework. • Agency banking ?? A dfcu customer checks her bank account transactions using mobile banking

  5. dfcu - Who we are Vision To be the preferred Ugandan financial institution providing a broad range of quality products to our chosen customer segments. Mission statement To grow shareholder value while playing a key role in transforming the economy and enhancing the well-being of our people.

  6. Development Finance Company of Uganda (dfcu Limited) was started by the CDC, IFC, DEG & GOU to provide long term financing and Equity to SMEs. 1964 • Lost decade, scaled down operations to 2 clerical staff. 1974-85 Evolution of dfcu 1995-99 • Diversification into Leasing, Property Development and mortgage financing. • dfcu Limited acquired Gold Trust Bank, thus extending the services of the Group to include Commercial banking. 2000 2004 • dfcu Limited was listed on the Uganda Stock Exchange. NORFUND acquired 10% stake in company. • Integrated Development Finance the dfcu Bank to create a ‘one stop shop’. 2008 • Shareholder realignment results in Rabo Bank and NORFUND acquiring stakes in DFCU Limited of 27.5% each. ACTIS down to 15% 2013

  7. Shareholder % Ownership Norfund 27.54 Rabo Development 27.54 CDC Group 15.00 Others 29.92 dfcu Ltd ownership at 31 December 2013 Mr. Kjell Roland of NORFUND receives a dummy certificate from the Uganda Minister of Finance confirming the increment of stake in dfcu Limited to 27.5%

  8. Corporate Governance Structure

  9. dfcu Organization Dynamics Risk PMO/strategy Credit Finance Legal/ Co. Sec Human Resources Internal Audit Marketing & Service Operations & IT

  10. dfcu at a glance Over 50 years in business. USD 550 m in total assets Over 300,000 customers. Built Own Head Office. Focus on Retail and SME segments. 43 branches (48 by y/e 2014). Mobile and internet banking solutions. Over 800 dedicated staff. Wide range of products: “One-stop shop”

  11. Funding Mix Equity EIB Customer deposits Lines of credit KFW Savings DEG Demanddeposits IFC Fixed deposits FMO Norfund Proparco

  12. Retail Personal loans Home loans Overdrafts Bus. Growth Loans Banking services Funds transfer Agency Women in Business program Our product offering – Assets & Services Corporate Commercial loans Term finance Commercial mortgages Commercial leases Overdrafts Bridge financing Trade finance Agri-business dfcu Women in Business training Treasury services Interbank lending T-bills & bonds FX trading

  13. Focus sectors Kampala University Agribusiness Education Manufacturing A production line at Wavah mineral water Plant The new Igara Tea Factory

  14. Focus sectors A rural road being upgraded by Spider Construction Company Brovad Hotel Quality Shopping mall Trade & commerce Transport Tourism Real estate Infrastructure development Oil & gas

  15. Challenges External Low levels of financial literacy. Climate change and environmental challenges. Regional instability. Poor infrastructure, especially in the rural areas. Competitive environment. Effects of the global uncertainty – Euro zone crisis Low levels of income and lack of collateral Internal High funding cost – external debt. High cost of operation. Skills gap. Low customer base.

  16. Opportunities for growth Oil and Gas investments – US$ 10b? Agribusiness potential. Manufacturing and service industries. Population demographics and urbanization. Infrastructure – rail, energy, roads… ICT penetration/evolution. Financial Inclusion. Regional integration

  17. Business Focus 2014/18

  18. In pursuit of Financial inclusion Build a robust retail operation with multiple distribution channels. Target: 1.2m customers by 2018. Provision of long term financing to SMEs. Enhancement of Risk management processes. Consolidation of activities in the new Head Office. Collaboration with mobile operators and roll out agency banking. Launched Quantum Leap Project in 2014 to drive efficiency Business process re-engineering. Internal capacity building. Product innovation / market segmentation. Agri-business value chain analysis.

  19. dfcu Performance Trends 2008-2013 (Euro 1 = UGX 3,525)

  20. Microfinance :HatthaKaksekar Limited, Cambodia (HKL) Company Background Shareholding Structure 17.49% 19.75% 19.73% • Started as an NGO food project in 1994 and a Microfinance operator in 2001. • Norfund has been invested since 2007. • Is among one of the top 4 MFIs in Cambodia and is moving towards being the leading, sustainable microfinance provider, helping clients to succeed in their businesses. • Employs 1872 people, of which 541 are female. • We have provided equity funding, loans in both local currency and in US dollar and an emergency liquidity credit line, when there was political turmoil. • Strategic plan initiated to transform to a fully fledged SME/ Micro finance banking group. Local SH 23.16% 19.87% Strong shareholder group who have been consistently supportive to HKL’s growth. Performance - Loan portfolio Unit: USD million As of June 2014, loan portfolio stood at USD 194 million with PAR>30 of only 0,04%.

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