Finance & Banking

Bankers urged to invest in Uganda’s tourism industry

KAMPALA– Local commercial banks in Uganda have been called upon to support firms in the tourism industry since it is the country’s major foreign exchange earner and job provider.

The call was made during the second day of the 5th Annual Bankers’ Conference held in Kampala under the theme: Bridging Financing Gaps in the Manufacturing, Tourism and Agribusiness Sectors for Economic Recovery and Growth post 2021.”

Uganda has full potential like any other country because it has nature, wildlife, cultural diversity, the weather, the food, music, handicrafts, and a fully English proficient welcoming, and friendly population. It only needs some investment,” said Luis Lechiguero, a representative of the European Union Delegation in Uganda.

On behalf of the European Union delegation in Uganda and other development partners that would like to work with you to support SMEs, we need you on board to help SMEs to improve their business plans to be more productive, to learn, and fulfill the requirements of the banks,  Lechiguero said.

DFCU staff at their exhibition booth (Courtesy photo).

He said Spain a country with a similar population as Uganda [around 45-46 million people] received 83 million visitors in 2018 and that year the sector contributed 15 percent to the GDP. “That is 190,000 million euros and three million jobs and many lives changed.”

He said tourism is a driving force for economic growth and employment but also for social and cultural transformation. “Uganda is a beautiful country. “I would consider retiring here,” Lechiguero said.

While also speaking, Julius Kakeeto, the Managing Director of Post Bank Uganda and Vice Chairman Uganda Bankers’ Association [UBA] stressed the importance of tourism to the country.

Julius Kakeeto, Post Bank Uganda MD and Vice Chairman of Uganda Bankers’ Association speaking at the conference (Courtesy photo).

“Tourism promotes trade and investment which significantly contributes to the development of other sectors like construction sector, manufacturing sector, transport, and financial services, among others,” Kakeeto said.

He said Shs 435 billion in credit financing has been disbursed to the larger tourism industry and support sectors excluding the real estate sector by close of 2021. “This figure is set to grow as opportunities for banks to finance recovery and growth of the sector in the medium-term, that is the next two to four years, he said.

Meanwhile, Daudi Migereko, Chairman Uganda Tourism Board [UTB] in his remarks highlighted the performance of the industry during pre and post-pandemic and the role banks can play to support Uganda’s biggest foreign exchange earner.

He urged government to provide more funding to the sector. “Tourism and hospitality, a highly productive sector of the economy and the biggest foreign exchange earner was given only 5 percent of the loanable money from Uganda Development Bank [UDB]. We appeal to banks to pick interest in tourism just like the energy sector,” Migereko, a former minister, said.

UTB Chairman Daudi Migereko speaking at the Bankers Conference in Kampala on Tuesday 2022 (Courtesy photo).

He urged the bankers to support both domestic and international tourism, saying they both have strong clientele, which requires the private sector to operate world-class tourism facilities.

He said a total of 448,996 hotel room bookings from March June 2020 were cancelled, which caused a loss of revenue amounting to US$ 320.8 million [Shs 1.19 trillion]

Banking should support local investors to establish meeting facilities in the 15 tourism cities “As a business, you can’t succeed without the support of financial institutions,”

He said banks need to avail funding to ensure readiness and attract international meetings.

“UTB has set a target of USD 100mn in four years… are you ready to be part of the story? As bankers, what are you putting in place to take this up?”

Basil Ajer Director Tourism in the Ministry of Tourism, Wildlife and Antiquities [MTWA] while addressing delegates at the conference, said there is a need to create new tourism products in the country.

“At government level there’s need to create new products. When you have unique products you have the potential to attract foreign and local tourists. We want to improve these areas and then invite you the private sector to invest,” Ajer added.

Director of Tourism Basil Ajer addressing delegates at the Bankers’ conference 2022 (Courtesy photo).

He said the Tourism Act is being amended to recognize the financing options for the tourism sector. The cabinet memorandum is being worked on and we shall have views coming in from the private sector.

According to a study conducted by MTWA in 2020, at least 70 percent of the workforce in the tourism industry lost their jobs because of the pandemic, while 91.8 percent of the tourism enterprises downsised the workforce due to the financial hit.

“Hotels were one of the hardest-hit industries by COVID-19. 75.2 percent of all hotel bookings in Uganda were cancelled by June 2020. The hotel occupancy rates reduced from an average of 58.2 percent before COVID-19 to as low as 5.3 percent by end of June 2020.”

“Tourism created 667,000 direct jobs, contributed 7.7 percent to Uganda’s GDP. This contribution took place despite minimal support from financial institutions and a limited budget allocation from Government.”

“We need to mainstream tourism the way other countries are doing if we are to compete and we need the financial institutions. Prior to Covid-19 outbreak, Tourism was Uganda’s leading foreign exchange earner bringing approximately US$1.6 billion,” Migereko

Panelists at Uganda Bankers Association conference 2022

The previous success was with limited financial support and low budget allocation by the government yet 10.3 percent of all global jobs, 10.3 percent of global GDP [US$9.6trn] are from Tourism. In 2022, global tourism is expected to grow by 30.7 percent, Migereko said.

According to Migereko, before Covid-19, tourism industry was Uganda’s foreign exchange earner bringing approximately US$1.6bln, created 667,000 direct jobs, contributed 7.7 percent to Uganda’s GDP with 58 percent of the workforce is composed of women.

The 2022 Annual Bankers Conference had delegates discuss the unexploited potential in Tourism for economic growth and development of Uganda’s tourism.

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