Uganda’s personal loans surge, overall credit growth slows

Uganda’s Ministry of Finance has released its “Performance of the Economy Report” for February 2025, providing insights into the country’s credit disbursement and private sector lending trends in January 2025. The report reveals a strong preference for personal and household loans, while overall credit growth experienced a marginal increase.

In January 2025, financial institutions approved Shs. 1,250.8 billion in credit out of total applications worth Shs. 2,090.3 billion, resulting in an approval rate of 59.8 percent. This indicates that while demand for credit remains high, a significant portion of applications are not being approved.

Personal and Household Loans Dominate

Consistent with trends observed in December 2024, personal and household loans continued to dominate the credit landscape in January 2025, accounting for a substantial 43.1 percent (Shs. 539.7 billion) of the total approved credit. This surge represents a significant increase from 27.0 percent in January 2024, suggesting a growing reliance on credit for individual consumption and household needs.

Other sectors receiving significant credit included:

• Trade: 19.5 percent (Shs. 244.3 billion)
• Building, Construction, and Real Estate: 11.0 percent (Shs. 137.2 billion)
• Agriculture: 9.8 percent (Shs. 122.4 billion)

However, the report also highlighted a decline in credit allocation to manufacturing and the building, construction, and real estate sectors compared to the same period last year. This shift in credit allocation could reflect changing economic priorities or sectoral challenges.

Marginal Growth in Private Sector Credit

The stock of outstanding private sector credit experienced a slight uptick of 0.27 percent in January 2025, rising to Shs. 22,880.45 billion from Shs. 22,818.96 billion in December 2024. This marginal growth was primarily driven by an increase in Shilling-denominated credit, which climbed from Shs. 16,272.98 billion in December 2024 to Shs. 16,371.30 billion in January 2025. This increase is attributed to higher deposits at deposit-taking institutions, providing them with more funds available for lending.

Conversely, foreign currency-denominated credit declined from Shs. 6,545.99 billion in December 2024 to Shs. 6,509.15 billion in January 2025. This decrease was partly due to the restructuring of key loans from dollar to shilling denominations, particularly in the telecommunications and communications sector. This shift could be influenced by fluctuations in exchange rates or strategic decisions by borrowers to mitigate foreign currency risk.

Implications and Context

The strong preference for personal and household loans may reflect changing consumer behavior or economic pressures on households.

The decline in credit to manufacturing and construction could signal potential slowdowns in these key sectors.

The shift from dollar to shilling-denominated loans suggests a potential move to reduce foreign exchange risk.

The overall low growth of private sector credit could point to a need for more lending into productive sectors of the economy.

The Ministry of Finance’s report provides a snapshot of Uganda’s credit market, highlighting both opportunities and challenges for the country’s economic development.