The State Minister for Trade, Industry and Cooperatives, David Bahati, has issued a pointed call for commercial banks to lower their lending rates, saying the cost of credit is throttling industrial and real estate investment even as the business environment steadies.
Bahati made the appeal on Friday during the official opening of DFCU Bank’s new branch at Namanve Industrial Park, the lender’s 55th outlet nationwide and a strategic foothold inside one of the country’s busiest manufacturing hubs.
“Industrial parks are engines of growth. We already have 12 operational parks and plans for 22. Embedding banks within these zones unlocks productivity, improves cash flow and accelerates growth for manufacturers,” Bahati said.
He argued that many of the hazards banks previously cited to justify high lending rates, such as political risk, security concerns and infrastructure deficits, have been largely addressed. “All these factors have now been cleared. We are not sure what is left that justifies the continued high lending rates,” he said.
Bahati singled out the mismatch between prevailing interest rates and sector returns. “At 15 to 18%, interest rates are far higher than the internal rate of return many manufacturers realise. Manufacturers often realise an internal rate of return of around 12% and the rate for real estate developers stands at about 8%. In those circumstances, borrowing to invest becomes uneconomic.
David Bahati, State Minister for Trade, Industry and Cooperatives
His intervention comes as industry contribution to GDP stands at an estimated 16.5%, with manufacturing alone recording nearly Shs8 trillion in revenue last year and employing more than 1.4 million people nationwide. Namanve itself hosts over 400 factories and some 4,000 employees, figures Bahati said made on-site banking a practical necessity.
While calling for lower lending rates, Bahati also praised the sector for moves that strengthen domestic savings. He commended DFCU’s recent hike in fixed deposit rates to 15%, describing the move as commendable and an effective tool to mobilise local capital.
“I’m not sure how you will make money at that rate, but it is a very good rate for fixed deposits,” he said, urging banks to balance competitive savings offerings with a downward review of lending tariffs.
Bahati urged the banking sector to complement government initiatives, including the Uganda Development Bank’s interventions, by offering affordable credit that matches the economics of production and real estate development. He said the government is simultaneously working to reduce its own borrowing appetite so private-sector financing can become more attractive and plentiful.
Margaret Karume, Chief Credit Officer at DFCU, said the Namanve branch is purpose-built to address the liquidity and transactional needs of manufacturers and their employees. “We have installed a cash depositor machine that accepts deposits 24 hours a day, seven days a week, all year round,” she said.
Karume added that the branch will offer trade finance, working-capital products, asset financing and SME-oriented services, combined with digital platforms aimed at easing day-to-day operations for firms inside the park.
David Bahati Opening up the new dfcu’s branch in Namanve
Local industry leaders welcomed the move, saying proximity banking reduces risks tied to cash handling and speeds access to working capital. Contractors and suppliers said timely access to finance is essential for meeting project cycles and payroll obligations.
At the launch, sector stakeholders also echoed Bahati’s call for lenders to review pricing. They argued that cumbersome loan processes and high collateral demands push smaller firms toward informal lenders, a practice that raises costs and curtails growth.
Analysts say the debate over rates touches on the broader challenge of aligning financial sector profitability with national industrial ambitions. Lowering interest rates, they suggest, will require a mix of factors, including greater competition among lenders, improved risk-sharing instruments, access to longer-term wholesale funding, and deeper government-backed credit facilities.
The branch opening dovetails with the government’s industrial strategy under the Tenfold Growth agenda and the Fourth National Development Plan, which aim to accelerate agro-industrialisation, mineral value addition and the formalisation of the rural economy. Embedding banks in industrial parks is part of a practical push to formalise supply chains and make credit and payments more efficient.
Uganda’s manufacturing base has expanded from just 81 factories in 1986 to nearly 10,000 establishments today. Still, observers say achieving the sector’s full potential will hinge on lowering the cost of capital, improving logistics and scaling technical skills.
DFCU’s Namanve branch, with its combination of around-the-clock deposit services and tailored industrial products, represents a model government and industry hope will be replicated across other parks. Officials say wider replication, combined with more competitive credit pricing, could unlock significant productivity gains, reduce reliance on costly informal finance and spur job-creating investment.
As the government expands industrial zones and policy makers press for a more industry-friendly financial environment, the conversation between regulators, banks and manufacturers over interest rates looks set to intensify, with the future of many investment plans hanging in the balance.
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