To be eligible for accessing aBi guarantees and lines of credit Financial Institutions (FIs) must meet the following criteria:
- Legal registration in Uganda,
- Favorable report from BOU or relevant regulator, and
- Demonstrated adequate procedures, internal controls and systems for borrower appraisal, credit approval, monitoring, and risk management.
Once aBi determines that the FI is eligible, it proceeds with an appraisal/due diligence as follows:
a) Annual financial reports for the financial institutions to be appraised are collected.
b) The key ratios for the financial institution are calculated including:
- Leverage, computed as total liabilities divided by equity.
- Profitability, computed as after-tax profit divided by equity.
- Liquidity, computed as (cash + near cash) divided by current liabilities.
c) Audited annual accounts are collected and must demonstrate at least 3 years of competent management and growth.
d) Financial institutions must demonstrate sound project/loan appraisal and monitoring skills through portfolio reports, skills sets, and documentation on credit files.
e) The financial institution must reasonably satisfy the Trust that it has sound governance and management in place as well as other institutional factors such as human resources and good systems and structures.
f) The financial institution must demonstrate that over 3% of its total loan portfolio is invested in agribusiness and that this portion of the portfolio is performing at least as well as the financial institution’s average portfolio in terms of annual yield and aging of arrears for the trailing 12 months.