Skip to main content
Press release

CDC takes controlling stake in DFCU – Uganda’s largest local financial group

06 May 2003
Email Actis

CDC Capital Partners (CDC), a leading risk capital investor in emerging markets, has taken control of DFCU Group in Uganda – the largest local financial group.

This has been achieved following CDC’s purchase of German Development and Investment Company’s (DEG) 25% shareholding, resulting in CDC having a 60 per cent stake in the business. The remaining shareholders are the IFC (21.5%) and the Government of Uganda (18.5%).

CDC first invested in the business in 1964, when it helped co-found DFCU together with the Ugandan government. More recently, CDC has played an active investor role in DFCU, providing it with strategic leadership through its participation on the board.

DFCU is a diversified financial business, with operations ranging from commercial banking to long-term lending and mortgage finance. DFCU has also pioneered the leasing markets where it is the market leader with an 80 per cent market share.

In an industry dominated by foreign players, DFCU has focused essentially on the small and medium sized enterprise (SME) segment, and its assets have grown, on average, over 40 per cent annually in the past three years. Strongly capitalised and profitable, DFCU is well positioned to continue growing in its markets.

In a country where 55 per cent of the Government’s budget is donor/aid based, DFCU plays a very important development role, receiving long-term credit lines from EIB and other DFIs and channelling them to the local SME sector.

While the Ugandan banking sector is small, with assets of approximately us$1.5bn, it is growing quickly, is profitable and well managed. In an economy notably underbanked, there is strong potential for growth within the financial sector – particularly in the areas of SME lending and retail financial services (mortgages, consumer lending, deposits). It is estimated that only 2% of the Ugandan population is ‘banked’.

Commenting on this announcement, CDC's Marta Gabadinho, said: "This deal reiterates CDC's commitment to the Ugandan banking industry and reflects our confidence in both DFCU and the Ugandan economy. DFCU is a well run business whose focus is on the fastest growing segments of the Ugandan financial sector. The investment in DFCU is in line with CDC's strategy to back good management teams in strong local banking groups. DFCU has significant potential to grow its operations nationally, as well as benefit from regional opportunities across East Africa."

Karl-Heinz Niessen of DEG, added: “We are pleased that we are leaving this business with CDC, who has an excellent understanding of the business and the industry. DEG’s exit from DFCU is in line with DEG’s business philosophy of exiting an investment after a certain period in order to ensure that funds can be made available for new investments. In this regard, we continue to look for interesting investment opportunities in the private sector of Uganda and are currently involved in helping to finance Uganda’s second national telephone network.”

Dr. William Kalema, Chairman of DFCU, concluded: “We are very pleased that CDC has increased its shareholding in the DFCU Group. Having a strong controlling shareholder will improve our credit rating in capital markets, and will further strengthen the confidence of our employees and our customers in the long term sustainability of the Group.”

Sign up to the street view for the latest news and insights