Ugandan banks approve 73% of loan applications amid uptick in lending

Private sector credit rebounded strongly in December 2025, with banks approving Shs1.86 trillion in loans, signalling improved business confidence and stronger appetite for financing at the close of the year.

According to the January 2026 Performance of the Economy Report, credit approved for disbursement totalled Shs1,855.87 billion out of loan applications worth Shs2,541.07 billion, translating into an approval rate of 73 percent.

This marked a sharp rise from the 59.7 percent approval rate recorded in November 2025 and was slightly higher than the 72.7 percent registered in December 2024, pointing to a sustained recovery in lending activity.

The month-on-month improvement was largely driven by increased lending to productive sectors of the economy, notably manufacturing, transport and communication, and agriculture.

Analysts say the rebound suggests financial institutions grew more confident in borrowers’ repayment capacity toward the end of the year, following months of cautious lending earlier in 2025.

Personal and household loans accounted for the largest share of approved credit in December, absorbing 23.8 percent of total disbursements, equivalent to Shs441.2 billion.

Of this amount, Shs165.0 billion was electronic credit, largely mobile money-based loans, underscoring the growing role of digital lending platforms in expanding access to short-term financing.

Manufacturing emerged as the second-largest recipient of credit, taking 18.3 percent or Shs338.7 billion of total approvals. The strong allocation to the sector reflects continued demand for working capital and investment financing as firms expand production capacity.

The trade sector followed closely, receiving 18.1 percent of total approvals, amounting to Shs335.4 billion. Increased lending to trade often signals rising commercial activity and stock financing ahead of seasonal demand cycles.

Building, mortgage, construction and real estate accounted for 12.2 percent of approved loans, equivalent to Shs226.7 billion. The sector remains one of the largest absorbers of bank credit, driven by ongoing infrastructure projects and private property development.

Business, community, social and other services took up 11.1 percent of approvals, amounting to Shs206.9 billion, while agriculture received 9.5 percent or Shs176.9 billion.

The rise in agricultural lending is particularly significant given the sector’s role in supporting rural incomes, food security and export growth. Expanded access to credit could help farmers invest in inputs, mechanisation and post-harvest handling.

Economists note that the overall increase in approval rates suggests easing credit conditions and improved liquidity within the banking system.

However, the dominance of personal and household borrowing, particularly electronic micro-loans, also highlights sustained consumer demand for short-term financing, which can carry higher interest costs compared to conventional bank loans.

The December figures, though reported with a one-month lag, provide a snapshot of financial sector performance at the end of 2025 and indicate that private sector credit growth regained momentum after a slowdown earlier in the year.

Sustained expansion in credit to productive sectors such as manufacturing, trade and agriculture will be critical in supporting economic growth, job creation and domestic investment in 2026.

With approval rates rising and sectoral lending broadening, the data signals cautious optimism for Uganda’s credit market heading into the new year, provided macroeconomic stability and borrower repayment capacity remain intact.