Credit to private sector jumps by Shs3.8 trillion in one year

KAMPALA. Private-sector borrowing rose to Shs27.7 trillion in June, signalling stronger demand for credit as businesses and households take advantage of lower lending rates and improving economic conditions.

The stock of outstanding private-sector credit increased by 3.8 per cent in one month, from Shs26.72 trillion in May to Shs27.74 trillion in June, according to the Ministry of Finance’s July 2026 Performance of the Economy Report.

The increase was recorded in both shilling and foreign-currency loans, with shilling-denominated credit rising from Shs18.55 trillion to Shs19.22 trillion, while foreign-currency credit increased from Shs8.16 trillion to Shs8.52 trillion.

On an annual basis, private-sector credit grew by 16 per cent, rising from Shs23.90 trillion in June 2025 to Shs27.74 trillion in June this year.

The Ministry attributed the growth to higher demand for credit, supported by improved economic activity and positive business sentiment.

The latest increase comes as borrowing costs ease, encouraging businesses to expand operations and households to access more financing.

The sectors that recorded notable increases in credit extensions included transport and communication, electricity and water, business, community and social services, as well as personal and household loans.

The expansion in private-sector credit also mirrors the broader improvement in economic activity.

Uganda’s economy grew by 6.4 per cent in the financial year 2025/26, up from 6.3 per cent in the previous financial year, while the Business Tendency Index remained above the 50-point threshold, indicating continued optimism among businesses.

The growth in credit could provide additional financing for investment, working capital and household consumption, although sustained borrowing will depend on the cost of credit and the ability of borrowers to service their loans.

The increase in foreign-currency borrowing also means businesses with foreign-currency obligations may have greater exposure to exchange-rate movements, particularly where their revenues are denominated in shillings.

The credit expansion comes at a time when the government and financial sector are seeking to deepen private-sector investment as a driver of economic growth.

The latest figures therefore point to a private sector that is increasingly willing and able to access bank financing, with stronger economic activity and improved business confidence supporting demand for loans.

However, analysts will be watching whether the growth in lending translates into increased private investment, production and job creation rather than mainly financing consumption.

For businesses, the key signal from the latest figures is that access to credit is improving, providing more room for expansion as the economy continues to grow.