Fraud, insider dealing at Uganda Development Bank: 900m disappears just like that; could this be a tip of the iceberg?

File photo: The Uganda Development Bank and European Union at the launch of ugx 62 billion soft loan and grants kitty for tourism sector players.
File photo: The Uganda Development Bank and European Union at the launch of ugx 62 billion soft loan and grants kitty for tourism sector players.
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In what could be described as a syndicated fraudulent scheme, a shrewd Ugandan armed with forged documents, perhaps with the help of Uganda Development Bank (UDB) staff, secured up to 900m in 2018. The loan tenor expired without the client paying a single penny.

The genesis

According to a highly placed source at UDB, In March 2018, the Bank approved and disbursed a loan – worth UGX. 900 million In favor of Real Life Solutions (RLS) Limited.



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The loan tenor was for three years- running from April 2018 to April 2021. The RLS facility was part of 51 facilities worth UGX. 257.8 billion Approved in 2018.

According to the documents RLS submitted, a portion of the loan was to be used to supply agricultural inputs, including fertilizers, herbicides among others, to the farmers with whom he claims to have a contractual agreement.

He would also use the loan to purchase the produce from the same farmers.

‘John Speke discovers L. Victoria’

In what could be equated to ‘John Speke discovering L. Victoria’, In the processes of following up the client for loan servicing, the UDB management ‘discovered’ that several documents [including the land title] that RLS submitted to the bank to support loan process were forged.

Worse still, the loan tenor had expired without the client paying a single penny to the 2018 Bronze Award winner for excellent financial reporting



The requirements of securing a loan from a financial institution is a clear Know Your Customer (KYC): postal address, physical address, including a website. We struggled to find the contacts of the RLS.

Was this a case of fraud? Could it a tip of the iceberg? How many such cases are happening, have happened before- do they form part of the bank’s huge non-performing loans? who handled the RLS facility? What actions were taken on the responsible officers? Read on.

Fraud may involve collusion, forgery, intentional omissions, misrepresentation or override of internal control

Securing a big loan

Just like in the medical world [a case of an operation] different people play diverse roles. Equally, in banking, loan processing is not a one man show.

The processes of securing a [big] loan: is long, careful, and a well-thought process. It involves four to five stages and sometimes back to back.

First step: the proposal is received and recorded. It is then presented to the committee, which comprises of credit, risk, finance, relationship and legal managers.

The process also involves a visit to the site a case- where the collateral is a land title. Bank officials will ordinarily ask the local authorities about details of the land.



The bank valuer formally writes to the Ministry of Lands inquiring about the land title- the land officer must formally write back to the bank

Armed with feedback from the Ministry of Lands, the Bank valuer, with the help of the legal department, values the land. The final process is approval of the facility.

What you see is not what you get

The UDB boasts a very strong internal control system. In 2018, the bank won a certificate of AADFI rating – the Bank got an A+ rating in governance, financial and operating standards.

2020 UDB financial statement reads: ‘’credit risk exposure is managed through a rigorous credit assessment process, pre and post sanction adherence to covenants with counter parties, adoption of other lending mechanisms like Apex lending and co-financing to improve on its credit risk ….’’

So what happened with the Real Life Solutions Ltd facility?

The key officers in the loan process at UDB are departments of: investments, credit, internal audit, legal, compliance, and the Chief Executive’s office. The processes ends on the desk of the Managing Director. After consulting the different heads of departments, s/he approves the facility.

A Kampala based financial expert says, ‘‘it is difficult to beat that vigorous process unless there was collusion, or some people slept on the job.

He adds: What have they done to follow up the customer for recovery and perhaps prosecution of client and staff for forgery?

Information obtained from the banks’ website, shows the UDB senior management team [which was perhaps responsible for the Real Life Solutions Ltd facility in 2018], is still holding onto their jobs.

Ms. Sumin Namaganda Musinguzi, the UDB head of communications, did not respond to our repeated mails ad WhatsApp messages for over a month when to thought clarity on issues regarding the Real Life Solutions ltd facility and other issues. [ see attached questions we sent her below]

All that glitters is not gold

The UDB 2019 Board Audit and Risk Committee (BARC) report reads in part, ‘’No significant findings came to the attention of the Committee to indicate that any material breakdown in internal controls had occurred during the financial year under review.’’ The committee, does not mention Real Life Solutions Ltd facility anywhere in its report
The BARC monitors the effectiveness of the UDB’s internal controls and compliance with the Enterprise-wide Risk Management Framework.



A fraud investigations expert told Newz Post that the Real Life Solution facility points to an insider job- with over one manager involved. He adds: it is for this reason that when a big fraud hits a bank- top managers including the MD are key suspects.

UDB loan impairment ratio of 11%

The UDB’s Loan impairment ratio for 2017, 2018, and 2019, stood at anywhere between 8% & 11%. – How much of this is related to insider dealing?
According to market experts, the acceptable loan impairment ratio is between three to five percent. At 11% UDB, which has in the past awarded certificates of merit for the best innovation in financial services, is their own league.
Bankrolled by the government of Uganda, According to 2020 financial statement, UDB received additional funding to the tune of UGX. 510 billion from the government of Uganda.

The UDB receives funding from several development financial institutions, including FAO, European Union, AFD , Islamic Development Bank, UNCDF, European Organization for Sustainable Development [EOSD] and the Kuwait Fund [a major support in UDB’s agricultural initiatives] The UDB manages these funds in trust on behalf of the Government of Uganda. The funds are recorded as a liability on receipt of the funds.



Recently, UDB and European Union announced the 2nd Tourism Facility. The total Facility is over UGX. 62 billion made up of UGX. 40 billion ring-fenced funds from UDB and complemented by a grant of UGX. 21.8 billion from the European Union.

Who else is responsible for the ‘mismanagement’ at UDB?

Board also approves loans: Effective from 1st January 2018, the Board Credit Committee (BCC) started approving credit applications in the excess of UGX. 1.5 billion Up from UGX. 0.5 Billion in the previous years. The Real Life Solutions facility was approved in March 2018. Did the board also approve this facility?

The BCC consists of 02 Independent/Non-Executive Directors, and the Managing Director. The Director Investments and Director Credit Risk attend BCC meetings as a permanent invitees.

A former board member told Newz Post that the board depends heavily on information given to them by senior management. ‘’ If what they give us is forged, it may be difficult for us to detect’’ he said

Audit and Risk Committee

The 2019 report by Board Audit and Risk Committee: (BARC) on internal Control report reads: ‘‘No findings have come to the attention of the Committee to show that any material breakdown in internal controls has occurred during the financial year under review’’
BARC committee comprises of: The Chief Internal Auditor, Director Finance and Business Operations, Head Legal and Head Risk attend BARC meetings as permanent invitees.
Welcome to Uganda’s corporate governance- The committee did not find any issues with the financial reports- including the dubious Real Life Solutions facility



from the archives: How Uganda Development Bank lost 10bn to internal fraud

Internal rot and collusion by Uganda Development Bank officials with borrowers is surfacing again. in 2012, a special investigation by the Auditor General, noted that some Bank officials generated project proposals and financial projections for potential borrowers, wrote replies to them on behalf of the bank and then deleted computer files to destroy evidence.-
a principal project analyst, was accused of originating letters on behalf of clients and replying to them on behalf of the bank. she drafted a demand letter from the bank to the client and on the same date drafted a reply to the same letter for the client.”
She allegedly did a similar thing for another client, West Meridian Hotel Ltd: “This letter was drafted on behalf of the company and sought an explanation from the bank about the unexplained accrual rates to the company loan account,” says the report. Read full report

Is government aware of incompetency at UDB?

In the document sent to the International Monetary Fund, government said that “to further strengthen UDB, ‘‘we shall amend the necessary legislation to place it under the regulation and supervision of Bank of Uganda.”

also read: Corporate turnaround: Uganda Red Cross Society recovers from governance and leadership crisis- unveils a 235bn strategic plan

May 2020, Prof Samuel Sejjaaka, the UDB former board chairperson told the Daily Monitor that the ‘‘UDB needs to provide assurance to its financiers that it is well run and supervised”.

also read: How Post bank lost millions of shillings to fraud

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