Ugandan banks credit approvals surge by nearly 50%

Credit activity in Uganda’s banking sector saw a sharp rise in May 2025, with total approved credit disbursements reaching Shs 2.31 trillion, marking a significant 49.4% increase from Shs 1.55 trillion in April, according to data from the Ministry of Finance’s June 2025 Performance of the Economy Report.

This robust uptick in lending activity reflects renewed borrowing appetite from both businesses and households, buoyed by improving economic conditions and a relatively stable interest rate environment despite modest rate hikes on longer-term government securities.

Of the Shs 2.61 trillion applied for in credit during the month, 88.7% was approved, indicating continued lender confidence in borrower profiles and possibly improved risk assessments amid a recovering private sector.

Transport, Utilities Dominate Credit Demand

A significant portion of the new credit was directed toward the Transport, Communications, Electricity and Water sectors, which collectively accounted for 30.6% (Shs 707.84 billion) of all disbursements. The spike reflects continued infrastructure expansion and capital investment needs in Uganda’s transport and energy sectors — both considered strategic to supporting industrialization and regional integration.

Personal and household loans came in second, comprising 21.2% (Shs 490.8 billion) of the approved credit. This suggests growing consumer confidence, possibly due to stabilized inflation and higher remittance inflows, which have boosted household liquidity.

Meanwhile, the manufacturing sector absorbed 11.9% (Shs 275.46 billion), underscoring ongoing investments in agro-processing, light industry, and construction-related production, as local industries seek to ramp up output in response to regional demand.

Outlook: Positive Sentiment, but Risks Remain

The May surge in credit disbursement signals rising economic momentum in key sectors, aided by stronger export earnings, relative exchange rate stability, and easing inflation. However, analysts caution that persistent global uncertainties — including commodity price volatility and tighter global financial conditions — could still weigh on credit growth in the months ahead.

With the government pushing for deeper private sector participation in Uganda’s development agenda, sustaining this lending trajectory will depend on maintaining macroeconomic stability, continued easing of credit constraints, and effective implementation of fiscal policies that de-risk productive sector investment.