Uganda’s demand for credit grows amid declining interest rates

Uganda saw the stock of total outstanding private sector credit grow by 1.5 percent to Shs20.396.5 trillion in March 2023 from Shs. 20.103.6 trillion in 2023, the Finance Ministry report shows.

According to the Ministry of Finance Performance of the Economy Report for April 2023, the growth was partly attributed to increased demand for credit as borrowers were more optimistic about interest rates declining with the expectation of an accommodative monetary policy and a pickup in economic recovery going forward.

Of the total stock in March 2023, Shs 14.018.7 trillion was shilling-denominated credit while Shs6.377.8 trillion was foreign currency-denominated credit.

According to the report, the value of credit approved for disbursement in March 2023 amounted to Shs1.496.6 trillion, up from Shs1.268.1 trillion the previous month. This represents an approval rate of 67.9% in comparison to 65.6% in February 2023.

During March 2023, personal and household loans accounted for the largest share of credit extended to the private sector at 23.0 percent (Shs 343.9 billion), this was followed by Building, Mortgage, Construction and Real Estate, and Trade at 20.8% and 15.9%, respectively.

Other notable recipients of credit included agriculture at 13.3 percent; manufacturing at 12.1 percent and business, community, social and other services at 8.8 percent. These six sectors constituted 93.8% of all the credit extended to the private sector during the month.