Private sector credit approvals dip but loan uptake improves

Kampala — The value of credit approved for disbursement by financial institutions fell slightly in October 2025, even as loan uptake improved, pointing to steady demand across key sectors of the economy.

According to the Performance of the Economy Report for November 2025 released by the Ministry of Finance, Planning and Economic Development, lenders approved credit worth Shs1.93 trillion in October, down from Shs2.12 trillion approved in September.

Despite the month-on-month decline in the value of approvals, the approval rate—the proportion of loan applications that translated into approved credit—rose to 76.7 percent in October, compared to 75.5 percent in September, signalling improving confidence between borrowers and lenders.

The report shows that credit allocation continued to be concentrated in a few dominant sectors, a trend that has persisted since the start of the 2025/26 financial year.

Personal and household loans attracted the largest share of approved credit, accounting for 24.7 percent, equivalent to Shs477.5 billion, underscoring sustained consumer borrowing amid high living costs.

The trade sector followed with 16.2 percent of total approvals (Shs312.8 billion), reflecting ongoing financing needs for wholesale and retail activity. Building, construction and real estate absorbed 12.8 percent (Shs247.9 billion), while business, community, social and other services accounted for 11.9 percent (Shs229.7 billion).

Productive sectors also remained significant recipients of credit. Agriculture took 11.8 percent of approved loans, while manufacturing received 11.3 percent, indicating continued lending to sectors viewed as critical for economic growth and job creation.

Economists say the improved approval rate suggests easing credit conditions, even as lenders remain cautious on the size of new exposures. The sustained dominance of household and trade-related borrowing, however, continues to raise questions about the balance between consumption-driven credit and long-term productive investment.

The Finance ministry notes that monitoring sectoral credit flows remains key to assessing financial stability and the effectiveness of monetary policy as Uganda navigates a fragile global and domestic economic environment.