aBi Finance offers Lines of Credit to Financial Institutions (FIs) in order to facilitate lending to agribusinesses across value chains.
Prequalification is mandatory before placing a fixed deposit with any Financial Institution. It shall be done annually or more frequently if decided by aBi using the following procedure:
a) Latest audited financial statements for all regulated financial institutions are consolidated in a single spreadsheet to consider both key ratios and qualitative analysis.
b) The key ratios for each 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) Institutions satisfying the criteria by scoring among the top 75% of the industry in capital and profitability and the top 50% of the industry in liquidity for at least two of the ratios are considered.
d) Qualifying institutions are shortlisted.
When aBi wishes to invest, prequalified institutions are sent solicitation letters or emails requesting their offers for interest to be paid for fixed deposits.
Criteria for accessing aBi guarantees and lines of credit Financial Institutions
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.
Promising institutions with strong interest and business vision for agribusiness who through due diligence are judged as not ready for a guarantee or line of credit can be assisted through aBi’s Financial Services Development business unit with technical assistance to improve their business capacity to the level where they are able to benefit from aBi Trust’s lines of credit and guarantees.