The Future of Ugandan SMEs: A banker’s perspective on bridging the financing gap
COMMENT | MOSES RUTAHIGWA | Small and Medium Enterprises (SMEs) are a vital part of Uganda’s economy, comprising 90% of the private sector, employing over 2.5 million people, and contributing 20% of the country’s GDP. They embody the grit and ingenuity that define Uganda’s entrepreneurial spirit. Yet, for long they have been hamstrung by challenges including persistent financing gaps, access to market, capacity building for scale, and low penetration of technology, among others.
A post-COVID-19 study by the Economic Policy Research Centre (EPRC) revealed that 69% of businesses reported a decline in credit access. The digital divide is another obstacle that many small businesses struggle to overcome in leveraging fintech solutions. In Addition, many small business owners lack financial literacy and business planning skills.
Without intervention, this gap could cost Uganda not only jobs but also its future industrial champions.
At Absa Bank Uganda, we are rewriting that story. In 2024, we expanded our loan book by 12.7%, reaching UGX 1.99 trillion, which demonstrates our confidence in SMEs as engines of economic transformation. We deliberately channeled capital into trade (26%), agriculture (10%), and manufacturing (9%). More than lending, we are building ecosystems through capacity building and purposeful partnerships.
Our approach transcends the traditional models. It’s tailored and built in collaboration to create value. Through the Absa Business Club, we support over 500 SMEs with access to global markets, knowledge and capacity building, networking and growth opportunities, and discounted financial services. We have brought together knowledgeable partners with DHL, Enterprise Uganda, and Uganda Airlines to provide tax guidance, trade clinics, and international missions to Europe, USA, China, UAE, South Africa, and more.
Why does this matter? Because wise money—infused with know-how and networks—does more than launch businesses. It creates jobs. It feeds industries. It ensures that a boda‑boda rider goes from subsistence to asset-building through green finance (Absa disbursed UGX 38 billion for e-mobility in 2024)
It roots value chains deeply in local economies—82% of our suppliers are local, accounting for UGX 76 billion in domestic spending. However, even as banks step up, aggregate data show that we’re still underserving entrepreneurs, and financial inclusion remains low—only 32% of rural adults have formal bank accounts.
What must we do?
Scale guarantees and risk-sharing mechanisms. Uganda must strengthen its instruments to encourage banks to lend with confidence.
Incentivise lenders with SME friendly policies. The government has made progress in attracting various credit guarantee schemes through various development finance partners. However, there’s a need to accelerate the scope by incentivising lenders and implementing SME-friendly policies, such as streamlined tax incentives. Absa’s credit officers are collaborating with SMEs to build audited accounts, board policies, peer networks, and succession plans.
Expand digital and cashless payments. Cash-heavy SMEs face theft, reconciliation errors, and inefficiencies in today’s economy. At Absa, we help our business clients gradually transition to digital payments, reducing risk and boosting secure, transparent collections. With inexpensive solutions like MobiTap, businesses can now accept contactless card payments via NFC-enabled smartphones, no hardware no monthly fees. Additionally, our e-commerce gateway and POS extend reach to online and in-store sales. We have embedded digital tools in our ecosystems that expand revenues, formalize operations, and build resilience for businesses.
Build ecosystems, not just loans. SMEs need training on export readiness, insurance, bookkeeping, and marketing. Partnerships with DHL, Grant Thornton, Prudential, trade clinics, and accelerator programs build that ecosystem and deepen institutional trust.
In conclusion, in today’s challenging economic climate marked by tighter liquidity, global uncertainty, and rising lending rates, Uganda’s economic ascent hinges on empowering SMEs. These are not abstract numbers; they are livelihoods. The food sold in markets, the palm trees grown in Kalangala, the sunflowers planted in Soroti—they matter. Your story matters.
*****
Moses Rutahigwa, Retail and Business Banking Director, Absa Bank Uganda
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