The Minister of State for Industry, David Bahati, has issued a strong appeal to Uganda’s financial institutions to urgently overhaul their lending frameworks, warning that the continued imposition of high interest rates, ranging between 17% and 23%, is not only stifling industrial growth but also threatening to derail the country’s broader economic transformation agenda.
He emphasized that unless lending practices become more affordable, accessible, and responsive to the unique needs of manufacturers and entrepreneurs, Uganda risks missing a crucial window to accelerate industrialization and realize its full economic potential.
Speaking at the Uganda Manufacturers Association (UMA) Annual Financial Symposium, Bahati praised the forum as a critical conduit for constructive policy engagement between manufacturers, financial institutions, and government leaders. He underscored the importance of such dialogue in shaping policies that support industrial growth and economic development.
In particular, Bahati highlighted that the recurring concerns raised by industry stakeholders, most notably regarding the affordability, accessibility, and timeliness of credit.
“We do not take these issues lightly. During our last engagement at this symposium, similar challenges were raised and formally submitted to Cabinet. I’m pleased to report that progress has been made on some of those fronts. Going forward, we are equally committed to ensuring that practical and well-grounded recommendations arising from today’s discussions will also be channeled to Cabinet for consideration and action,” he affirmed.
The minister sounded a strong warning about the prevailing lending conditions, which he said are significantly constraining the growth and competitiveness of Uganda’s industrial sector. “With interest rates hovering between 17% and 23%, coupled with short loan tenures and lengthy approval processes, the current financial environment is simply not conducive for industrial expansion,” he cautioned.
He urged financial institutions to rethink their lending models, moving away from rigid, collateral-heavy approaches and instead embracing more progressive frameworks that consider an entrepreneur’s vision, innovation, and potential for long-term growth.
“If collateral was the only path to success, visionaries like Bill Gates, who started out with nothing more than an idea, would never have made it. We must begin financing potential, not just property. A transformative idea today could be the foundation of Uganda’s next industrial powerhouse, if we empower it with the right capital at the right time,” Bahati remarked.
Pointing to progress made in the financial sector, including local banks beginning to finance government projects, Bahati praised the growing collaboration between the public and private sectors. But he questioned why, despite improved risk management systems, like credit reference bureaus, interest rates remain high.
“Manufacturing in Uganda yields an internal rate of return of around 10%. Lending above 17% suffocates growth. Meanwhile, some banks access funds at low international rates but lend to Ugandans at two to three times that amount,” he said, noting that Uganda remains among the countries with the highest interest rates in the region.
Bahati reiterated the government’s commitment to supporting industry through initiatives such as recapitalizing the Uganda Development Bank (UDB), which now offers loans to manufacturers at rates as low as 8%. He also highlighted the $217 million GROW Project, financed by the World Bank, aimed at industrial transformation and job creation.
He urged manufacturers to utilize government-backed facilities like UDB and subsidized agro-industrial finance schemes being piloted with banks such as Housing Finance Bank, where the government covers interest payments and borrowers repay only the principal.
“Government is doing its part. Now we call on financial institutions to do theirs, by providing not just access to finance, but affordable access,” Bahati emphasized
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