Uganda’s Finance Minister Henry Musasizi has urged commercial banks to reduce lending rates and increase financing to productive sectors as the government seeks to expand the economy tenfold by 2040.
Speaking at the 9th Annual Bankers Conference at Marriott Hotel in Nsambya, Kampala, Musasizi said Uganda’s target of growing its economy from about $50 billion in fiscal 2025/26 to $500 billion by 2040 would require greater access to affordable, long-term finance.
“Government cannot deliver Uganda’s transformation alone. We need you, and indeed, the banking and financial sector is central to the tenfold growth strategy,” Musasizi said.
High lending rates remain a constraint
Musasizi said average lending rates of between 18% and 20% remain a major challenge for businesses seeking to invest and expand.
He called on banks to improve credit assessment, make greater use of available data within the legal framework and expand risk-sharing and guarantee arrangements to reduce the risk premiums attached to loans.
Lower financing costs, he said, would enable businesses to make longer-term investments while supporting the government’s broader economic transformation agenda.
The minister also urged banks to redirect more credit towards agriculture, tourism, minerals including oil and gas, and science, technology and innovation under the government’s ATMS priority areas.
He said lending should not remain heavily concentrated in trade at the expense of sectors capable of expanding production, exports, employment and industrial capacity.
Credit target rises sharply
Musasizi said Uganda needs a major expansion in private-sector financing if the $500 billion economic target is to be achieved.
Private-sector credit, currently estimated at about Shs28 trillion, needs to rise to Shs490 trillion by 2040, he said.
Capital markets mobilisation would also need to increase from about Shs1.5 trillion to Shs440 trillion over the same period.
The figures underline the scale of financing required beyond conventional commercial bank lending.
Musasizi called on banks to work with the Capital Markets Authority to deepen long-term financing through infrastructure bonds, project bonds, green bonds and equity markets.
Banks urged to expand financial inclusion
The minister also placed financial inclusion at the centre of the growth strategy, particularly among farmers targeted for commercialisation under the Parish Development Model.
He said the approximately eight million farmers targeted by the programme need access to financial services that allow them to save, borrow, insure, receive payments and invest.
Government, he said, would continue focusing on macroeconomic stability and financial-sector reforms while working to expand the capitalisation of Uganda Development Bank.
Banking sector seeks broader sources of capital
Uganda Bankers Association Chairperson and Housing Finance Bank Chief Executive Officer Michael Mugabi said commercial bank credit alone would not provide the scale of financing required to achieve the country’s long-term economic ambitions.
He called for greater mobilisation of equity finance, diaspora capital, blended finance, impact funds, sustainability finance and risk-mitigation instruments.
“Our mission without execution is merely an aspiration,” Mugabi said, urging stakeholders to identify specific financing constraints and develop practical solutions.
His comments point to a financing gap that cannot easily be closed through traditional bank loans alone, particularly for large infrastructure, industrial and long-term investment projects.
Atingi-Ego links credit growth to financial stability
Bank of Uganda Governor Michael Atingi-Ego said financial stability would remain critical as Uganda seeks to expand credit and investment. He highlighted real GDP growth of 6.4%, annual inflation of 3.3% in the 12 months to July and a decline in non-performing loans to 2.67%.
Atingi-Ego cautioned banks against expanding lending without ensuring that credit growth is supported by adequate deposits, long-term funding and capital. He also called for greater participation by pension funds, insurance companies, development finance institutions and capital markets to complement commercial bank lending.
The governor challenged financial institutions to develop measurable strategies for financing the ATMS sectors and translate commitments into funded projects.
Uganda’s growth ambitions, he said, will ultimately depend on whether capital can be mobilised and deployed effectively to farmers, manufacturers, hotels, mining operations and technology companies.
The discussions at the bankers’ conference therefore placed the financial sector at the centre of Uganda’s economic transformation strategy, while highlighting the scale of the challenge: expanding access to finance, lowering its cost and shifting more capital towards productive investment without undermining financial stability.
