Finance Minister Henry Musasizi has urged commercial banks to lower lending rates and increase financing to productive sectors if Uganda is to achieve its ambitious plan of growing the economy tenfold by 2040.
Minister Musasizi said the banking and financial sector has a central role to play in supporting the government’s plan to expand Uganda’s economy from about $50 billion (about Shs180 trillion) in the 2025/26 financial year to $500 billion (about Shs1.8 quadrillion) by 2040.
He made the callon Friday while speaking at the ninth Annual Bankers Conference held at the Marriott Hotel in Kampala.
The minister said the country’s economic transformation cannot be achieved through government spending alone, urging financial institutions to provide affordable and long-term credit to businesses and individuals involved in productive activities.
“Government cannot deliver Uganda’s transformation alone. We need you and indeed, the banking and financial sector is central to the tenfold growth strategy,” Minister Musasizi said.
He said commercial lending rates, which currently average between 18 per cent and 20 per cent, remain a major constraint to investment and expansion of businesses.
Minister Musasizi asked banks to improve their credit assessment systems, make better use of available data within the law and expand risk-sharing and loan guarantee mechanisms to reduce the risk premium charged to borrowers.
He also challenged financial institutions to redirect more credit towards what government calls the ATMS priority sectors — agro-industrialisation, tourism, minerals, including oil and gas, and science, technology and innovation.
He said banks have traditionally concentrated a significant proportion of their lending on trade, yet Uganda needs greater investment in sectors capable of generating jobs, exports and higher productivity.
The minister further urged banks to work with the Capital Markets Authority to deepen access to long-term financing through infrastructure bonds, project bonds, green bonds and equity financing.
CREDIT TARGET
Minister Musasizi said Uganda’s private sector credit must increase from the current Shs28 trillion to Shs490 trillion by 2040 if the country is to achieve the required level of economic transformation.
He said mobilisation through capital markets should also increase from about Shs1.5 trillion to Shs440 trillion over the same period.
The minister also called for expanded financial inclusion, particularly among the eight million farmers targeted for commercialisation under the Parish Development Model.
He said farmers should be able to access financial services that enable them to save, borrow, insure their activities, receive payments and invest.
“Financial inclusion must be taken to scale,” he said, stressing that farmers and other small businesses need access to appropriate financial products if they are to move from subsistence production to commercial activity.
Musasizi said government would continue to maintain macroeconomic stability, pursue financial sector reforms and work towards increasing the capitalisation of Uganda Development Bank to support long-term investment.
BANKERS RESPOND
Uganda Bankers Association chairman and Housing Finance Bank chief executive officer Michael Mugabi said the banking industry remains committed to supporting the $500 billion economic ambition, but warned that bank credit alone cannot provide all the financing required.
Mugabi called for greater use of equity financing, diaspora capital, blended finance, impact funds, sustainability finance and risk-mitigation instruments.
“Our mission without execution is merely an aspiration,” he said, urging stakeholders to identify specific financing constraints and develop practical solutions.
He said Uganda requires a broader financing ecosystem capable of supporting large-scale investments beyond what commercial banks can provide.
Bank of Uganda Governor Michael Atingi-Ego said macroeconomic stability remains an important foundation for economic transformation.
Dr Atingi-Ego said the economy grew by 6.4 per cent in real terms, while annual inflation stood at 3.3 per cent in the 12 months to July. He also noted that the ratio of non-performing loans had declined to 2.67 per cent.
However, the governor cautioned banks against expanding credit without securing adequate deposits, long-term funding and capital to support the lending.
He said pension funds, insurance companies, development finance institutions and capital markets should complement commercial banks in providing the financing required for long-term investments.
Dr Atingi-Ego also challenged financial institutions to develop measurable strategies for financing the ATMS sectors and ensure that their commitments translate into funded and executable projects.
He said Uganda’s transformation would require coordinated efforts to mobilise capital for farmers, factories, hotels, mining projects and innovators.
The call for cheaper credit comes as government seeks to stimulate private-sector investment and shift economic activity towards sectors expected to generate higher productivity, employment and export earnings.
