What you need to know:
- Data from Finance Ministry shows total credit approved for disbursement fell from Shs1.56 trillion in May to Shs1.18 trillion in June.
Most financial institutions have decreased their credit issuance due to rising loan default rates to safeguard their investments.
Data from Finance Ministry shows total credit approved for disbursement fell from Shs1.56 trillion in May to Shs1.18 trillion in June.
The approval rate for loans decreased by 4.8 percent to 62.8 percent as banks exercised caution due to rising risks.
“The reduction in value of approved credit in June was mainly attributed to risk aversion among commercial banks, driven by an increase in the ratio of non-performing loans to total gross loans from 5.57 percent in May to 5.93 percent in June,” Finance Ministry said in the July performance of the economy report.
Households received the most credit (23.7 percent, or Shs279.3b), followed by agriculture and construction. Credit for trade declined from Shs248b to Shs198b.
The United Nations Conference on Trade and Development (UNCTD) 2023 review of Uganda’s entrepreneurship policy notes that, while financial inclusion has increased in the country, most micro and small enterprises continue to rely on informal financial services, worsened by low levels of financial literacy.
“Credit is mainly provided by banks and interest rates are high. Alternative sources such as venture capital are still a new phenomenon,” UNCTD says.
Government says that in order to close the financing gap, Sustainable Development Goal 5 needs to be implemented by increasing digital inclusion and elimination of gender-based income inequality.
To this end, the Office of the Prime Minister has partnered with the private sector and UN WOMEN to address financing gap among women.
This will be implemented through a memorandum of understanding between the CEO Summit and UN Women that will craft solutions to ease channels through which women entrepreneurs can raise inexpensive capital.
Mr Albert Byamugisha, a senior technical adviser in the Office of the Prime Minister, said on the sidelines of signing the memorandum that the CEO Summit represents all private sector executives through which they will mobilise about $1m (Shs3.7b) to scale entrepreneurship among the vulnerable women start-ups.