An IMF study found that financial inclusion had expanded substantially through mobile money and digital platforms, but private-sector credit remained shallow compared with other East African countries.
Uganda’s private credit-to-gross domestic product ratio increased by only 6.7 percentage points between 2001-2005 and 2021-2025. Kenya recorded an increase of 13.3 percentage points, followed by Rwanda at 13.9 and Tanzania at 9.4.
Real private-sector credit growth slowed from approximately 5% to 6% annually between 2011 and 2020 to around 2% to 3% following the COVID-19 pandemic.
The slowdown was recorded across productive sectors, while personal and consumption lending remained comparatively resilient.
Uganda also has the highest interest-rate spreads in the East African Community. Operating costs account for 59.1% of banking spreads, while provisions for potential loan losses contribute 13.7%.
Technology investment, staffing, cash handling and the cost of assessing borrowers with limited collateral or credit histories contribute to high banking expenses.
Government borrowing is also reducing the financing available for businesses. Bank claims on government compared with private-sector claims increased from 44% in 2019 to 65% in 2024.
Only 14% of Ugandan adults use formal bank accounts, compared with 52.5% in Kenya and 22% in Rwanda and Tanzania.
More than half of Uganda’s population earns less than approximately $40 monthly, while 91% of adults receive income in cash.
Formal account ownership nevertheless reached 68% in 2023, driven largely by mobile money. Digital lending increased from 0.2% of gross domestic product in late 2021 to 1.9% in late 2024.
The IMF called for stronger credit-reporting systems, improved financial and digital literacy, greater consumer protection and increased mobilisation of long-term savings.
Uganda should also deepen capital markets, improve financial reporting among smaller businesses and ensure financial technology companies participate in credit-information systems.
–IMF/ChannelAfrica–
