Uganda overhauls policy to formalize, modernize MSME sector

KAMPALA, Uganda — The Ugandan government is rewriting its policy for micro, small and medium enterprises in an effort to modernize a sector that accounts for more than 90% of the private economy.

Officials at the trade ministry said the overhaul is intended to address chronic informality, weak access to finance and low technological capacity that have long hindered the sector’s growth. The policy update is being aligned with the government’s ambitious goal of transforming the economy into a $500 billion powerhouse within 15 years.

Last week, the government held its first consultative meeting, bringing together government agencies, development partners and private sector groups to discuss the proposed changes.

Patrick Mugisha, commissioner for business development and quality assurance at the trade ministry, noted that the existing approach had lagged behind, failing to address structural weaknesses in the private sector. He estimated that nearly 70% to 80% of MSMEs operate informally, which restricts their access to credit, certification, government procurement and regional markets.

This large informal sector contributes to Uganda’s low tax-to-gross domestic product ratio of about 13%, which falls below the regional average of 16% to 18%.

The new rulebook suggestions include a “carrot and stick” approach to encourage informal firms to formalize. The policy-making process is also being aligned with the government’s import substitution agenda, which aims to reduce dependence on foreign goods by boosting domestic production and value-added manufacturing.

Stakeholders Welcome Policy Rethink

Private sector leaders welcomed the intervention, stressing that MSME input is crucial for the policy’s success.

Damali Ssali, country director for the Global Alliance for Improved Nutrition, said involving MSMEs in co-creating the new policy will support growth.

“It means that the MSME have an opportunity to actually input within that policy accountability benchmarks and how the government is going to be accountable to them,” she said.

Sarah Kagingo, board vice-chairperson at the Private Sector Foundation, called the review of the 2015 MSME policy critical for the country’s economic growth ambitions. She stressed that the updated policy must reflect global technological shifts, treating artificial intelligence and digital tools as core elements rather than optional ideas.

“For the private sector to grow, the revised policies must zero in on practical improvements that respond to today’s challenges while opening doors to new opportunities,” Kagingo said, citing the need for support for digital literacy and e-commerce platforms.

Stakeholders at the meeting offered specific proposals:

Grace Nanyonga of Granafish Supplies urged government agencies to harmonize policies and refund fees paid for permits if an MSME is denied approval.

Gudula Naiga Basaza, managing director at Guide Leisure Farm, proposed structuring standardization to address high compliance costs, arguing that the expense sometimes outweighs the profit.

Substandard Goods Challenge

The need for a clear standards policy was underscored by the prevalence of fake and substandard products. James Kasigwa, the executive director at the Uganda National Bureau of Standards, said substandard and low-quality goods remain a major market challenge.

A 2017 survey commissioned by UNBS found that 54% of products on the Ugandan market were either fake or counterfeit. The Anti Counterfeit Network Africa estimates Uganda loses 6 trillion shillings annually to such products.

Kasigwa said the policy review and the launch of the guide for good governance of the national quality infrastructure “marks a decisive step towards a transparent, accountable and higher performing quality ecosystem.”