Hoteliers urge UDB to cut borrowing rate to single digit

KAMPALA, September 16, 2024 – Hoteliers and investors in Uganda’s hospitality sector are calling for a reduction in the borrowing rate charged on loans provided by the Uganda Development Bank [UDB], which supports the country’s private sector.

Currently, UDB offers development loans at interest rate exceeding 10 percent, which many players view as a significant barrier to attracting investment not only in the hospitality sector but across other industries as well.

Suzan Muhwezi, Chairperson of the Uganda Hoteliers Association [UHOA], addressed the issue at a recent tax policy and administration conference hosted by the Ministry of Finance, Planning, and Economic Development [MPFED] in Kampala.

She urged UDB to lower its interest rates to at least 8 percent to stimulate investment across various sectors, including hospitality, agriculture, and tourism.

Muhwezi, who also serves as a Senior Presidential Advisor on Trade, emphasised that high interest rates are discouraging investment and job creation in Uganda. “The hospitality sector is a key driver of Uganda’s economy, contributing significantly to foreign exchange earnings, employment, and local content promotion. However, the high cost of borrowing from institutions like UDB is stifling growth and deterring potential investors who could otherwise contribute to the sector’s expansion,” she said.

Currently, average commercial bank rates for shilling-denominated loans are below 20 percent, though some banks charge above this threshold. Muhwezi highlighted the crucial role of affordable financing in fostering growth and development, particularly in the hospitality industry.

“Lowering interest rates to single digits would facilitate expansion and improvement for current investors and attract new ones who are deterred by the high cost of borrowing,” she argued.

Many hotel and hospitality facility owners are struggling with high-interest loans, exacerbated by the sector’s struggles during the COVID-19 pandemic, which heavily impacted tourism in the country.

Muhwezi, who is also Vice-Chairperson of the Uganda Tourism Board [UTB], stressed that financial support is essential for the sector’s recovery and regional competitiveness. “We need a conducive environment to recover and thrive. Affordable credit is vital for upgrading services, enhancing customer experience, and remaining competitive both regionally and globally,” she added.

The Kampala conference offered a platform for dialogue among government officials, investors, and sector players on optimising tax incentives and policies to encourage investment. Participants advocated for actionable measures to improve financial accessibility, reduce interest rates, and create conditions that stimulate investment.

The hospitality industry, encompassing hotels, lodges, and other accommodation facilities, is integral to Uganda’s tourism sector, a major foreign exchange earner. Investing in such enablers as infrastructure development, security, and promotion could significantly boost the tourism industry and enhance the country’s foreign exchange earnings.

https://thecooperator.news/hoteliers-tourism-students-to-get-more-skills/

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