Why capital is stalling in Uganda’s energy sector

Commercial banks have capital available to invest in Uganda’s power network, but a shortage of well-prepared, bankable proposals is preventing funds from reaching energy projects, industry leaders have warned.

Speaking at the Energy Convention in Kampala, executives from Absa Bank Uganda said the primary barrier to expanding electricity access across the country is project readiness rather than a shortage of liquidity.

Uganda currently has an installed power generation capacity of 2,098 megawatts, yet overall electrification averages 60%. In rural areas, coverage drops to 42.4%, leaving more than 90% of households reliant on traditional biomass fuels like wood and charcoal.

The government aims to expand total generation capacity to 15,420 megawatts by 2030 to fuel its broader economic growth plans.

Michael Segwaya, Chief Financial Officer at Absa Bank Uganda, noted that while the government allocated 2.07 trillion Ugandan shillings to the power sector in the 2026/27 budget, private sector capital must step in to build operational assets.

Benard Kamatte, Head of the Financial Institutions Group at Absa Bank Uganda, explained during a panel on green finance that private investors remain cautious due to unmitigated technical and financial risks.

“Our biggest bottleneck is bankability,” Kamatte said. “Capital follows risk mitigation, and if we don’t have a good understanding of the technology we’re supporting, it becomes very difficult to pull capital into that space.”

He noted that many energy ventures stall during early stages because developers fail to complete thorough feasibility studies, environmental impact assessments, and financial structuring before seeking institutional backing.

To unblock the capital pipeline, Kamatte called on Development Finance Institutions to provide early-stage risk capital. This funding would de-risk pre-construction phases for high-potential areas such as mini-grids, solar power, and battery storage systems.

He pointed to Absa’s initiative with the Uganda Energy Credit Capitalization Company—which blends concessional funds to cap lending rates at 15% annually—as a practical model to lower borrowing costs and deploy capital effectively.