<\/p>\n
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.<\/p>\n
<\/p>\n
Uganda\u2019s 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.<\/p>\n
<\/p>\n
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.<\/p>\n
<\/p>\n
The slowdown was recorded across productive sectors, while personal and consumption lending remained comparatively resilient.<\/p>\n
<\/p>\n
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%.<\/p>\n
<\/p>\n
Technology investment, staffing, cash handling and the cost of assessing borrowers with limited collateral or credit histories contribute to high banking expenses.<\/p>\n
<\/p>\n
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.<\/p>\n
<\/p>\n
Only 14% of Ugandan adults use formal bank accounts, compared with 52.5% in Kenya and 22% in Rwanda and Tanzania.<\/p>\n
<\/p>\n
More than half of Uganda\u2019s population earns less than approximately $40 monthly, while 91% of adults receive income in cash.<\/p>\n
<\/p>\n
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.<\/p>\n
<\/p>\n
The IMF called for stronger credit-reporting systems, improved financial and digital literacy, greater consumer protection and increased mobilisation of long-term savings.<\/p>\n
<\/p>\n
Uganda should also deepen capital markets, improve financial reporting among smaller businesses and ensure financial technology companies participate in credit-information systems.<\/p>\n
<\/p>\n
–IMF\/ChannelAfrica–<\/p>\n
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