Banks must finance Uganda’s growth agenda, Musasizi says

KAMPALA. Finance Minister Henry Musasizi has challenged commercial banks to lower lending rates and increase financing to productive sectors if Uganda is to achieve its ambition of growing the economy tenfold by 2040.

Mr Musasizi said the country’s target of expanding the economy from about $50 billion in the financial year 2025/26 to $500 billion by 2040 would require affordable, patient and long-term financing from the banking and wider financial sector.

“Government cannot deliver Uganda’s transformation alone. We need you and indeed, the banking and financial sector is central to the tenfold growth strategy,” Mr Musasizi said.

Speaking at the 9th Annual Bankers Conference at the Kampala Marriott Hotel in Nsambya, Kampala, the minister said the cost of borrowing remains a major constraint to private investment, with average commercial lending rates ranging between 18 per cent and 20 per cent.

He urged banks to improve credit assessment and make better use of available data, within the law, to distinguish between high- and low-risk borrowers and reduce the risk premium charged on loans.

Mr Musasizi also called for greater use of risk-sharing and credit guarantee schemes to encourage lending to businesses that may lack sufficient collateral.

He urged banks to redirect more credit to the government’s ATMS priority sectors—agro-industrialisation, tourism, minerals including oil and gas, and science, technology and innovation—rather than concentrating mainly on trade.

“Private sector credit must rise from Shs28 trillion today to Shs490 trillion by 2040,” he said.

The minister also challenged the financial sector to deepen long-term funding through the capital markets, including infrastructure bonds, project bonds, green bonds and equity financing, in collaboration with the Capital Markets Authority.

He said Uganda would also need to expand financial inclusion, particularly among the eight million farmers targeted for commercialisation under the Parish Development Model.

Mr Musasizi said farmers should be able to save, borrow, insure, receive payments and invest through a more accessible financial system.

He added that capital markets mobilisation must increase from about Shs1.5 trillion currently to Shs440 trillion by 2040.

Government, he said, would continue to maintain macroeconomic stability, implement financial sector reforms and work towards increasing the capitalisation of Uganda Development Bank.

Banks seek wider financing pool

Uganda Bankers Association chairman Michael Mugabi said the banking sector supports the $500 billion economic ambition but warned that bank credit alone would not provide the scale of financing required.

Mr Mugabi, who is also Housing Finance Bank chief executive, called for greater use of equity finance, diaspora capital, blended finance, impact funds, sustainability finance and risk-mitigation instruments.

“Our mission without execution is merely an aspiration,” he said, urging stakeholders to identify financing constraints and develop practical solutions.

Bank of Uganda Governor Michael Atingi-Ego said macroeconomic stability would remain essential to attracting and deploying the capital required for economic transformation.

He cited real GDP growth of 6.4 per cent, annual inflation of 3.3 per cent in the 12 months to July and a decline in non-performing loans to 2.67 per cent as indicators of financial and economic stability.

Mr Atingi-Ego, however, cautioned banks against expanding credit without matching it with adequate deposits, long-term funding and capital.

He said pension funds, insurance companies, development finance institutions and capital markets must complement commercial banks in providing long-term financing.

The governor also challenged financial institutions to develop measurable strategies for financing the ATMS sectors and turn their commitments into funded and executable plans.

Uganda’s economic transformation, he said, would require coordinated financing for farmers, manufacturers, hotels, mining projects and technology innovators.