Key Takeaways
- • The IMF says Uganda must reduce borrowing costs, mobilise long-term savings and improve banking efficiency to unlock private-sector investment and faster economic growth.
- • Uganda's private credit-to-GDP ratio rose only 6.7 percentage points between 2001-2005 and 2021-2025, versus 13.3 points in Kenya, 13.9 in Rwanda and 9.4 in Tanzania.
- • Real private-sector credit growth slowed from roughly 5-6% annually (2011-2020) to about 2-3% after COVID-19, with productive sectors hit hardest.
- • Uganda has the highest interest-rate spreads in the East African Community; operating costs make up 59.1% of banking spreads and loan-loss provisions 13.7%.
- • Bank claims on government rose from 44% of private-sector claims in 2019 to 65% in 2024, crowding out business lending.
Summary
The International Monetary Fund has urged Uganda to deepen private-sector credit as a condition for stronger growth, according to an IMF study reported by Channel Africa. The study found that financial inclusion has expanded substantially through mobile money and digital platforms, but private-sector credit remains shallow compared with peers in East Africa.
Uganda's private credit-to-GDP ratio increased by only 6.7 percentage points between 2001-2005 and 2021-2025. Over the same period Kenya recorded an increase of 13.3 points, Rwanda 13.9 and Tanzania 9.4. Real private-sector credit growth slowed from approximately 5% to 6% annually between 2011 and 2020 to around 2% to 3% after the COVID-19 pandemic. The slowdown was broad across productive sectors, while personal and consumption lending remained comparatively resilient.
The IMF identifies high banking costs as a central constraint. Uganda has the highest interest-rate spreads in the East African Community, with operating costs accounting for 59.1% of spreads and provisions for potential loan losses contributing 13.7%. Technology investment, staffing, cash handling and the cost of assessing borrowers with limited collateral or credit histories all add to expenses. Government borrowing further reduces financing available to businesses: bank claims on government rose from 44% of private-sector claims in 2019 to 65% in 2024.
Financial access remains uneven. Only 14% of Ugandan adults use formal bank accounts, compared with 52.5% in Kenya and 22% in Rwanda and Tanzania. More than half of the population earns less than about $40 per month, and 91% of adults receive income in cash. Formal account ownership nevertheless reached 68% in 2023, driven largely by mobile money, and digital lending grew from 0.2% of GDP in late 2021 to 1.9% in late 2024.
To address these gaps, the IMF recommends stronger credit-reporting systems, improved financial and digital literacy, greater consumer protection, and increased mobilisation of long-term savings. It also calls for deeper capital markets, better financial reporting among smaller businesses, and participation of fintech companies in credit-information systems.
Uganda's private credit-to-GDP ratio increased by only 6.7 percentage points between 2001-2005 and 2021-2025. Over the same period Kenya recorded an increase of 13.3 points, Rwanda 13.9 and Tanzania 9.4. Real private-sector credit growth slowed from approximately 5% to 6% annually between 2011 and 2020 to around 2% to 3% after the COVID-19 pandemic. The slowdown was broad across productive sectors, while personal and consumption lending remained comparatively resilient.
The IMF identifies high banking costs as a central constraint. Uganda has the highest interest-rate spreads in the East African Community, with operating costs accounting for 59.1% of spreads and provisions for potential loan losses contributing 13.7%. Technology investment, staffing, cash handling and the cost of assessing borrowers with limited collateral or credit histories all add to expenses. Government borrowing further reduces financing available to businesses: bank claims on government rose from 44% of private-sector claims in 2019 to 65% in 2024.
Financial access remains uneven. Only 14% of Ugandan adults use formal bank accounts, compared with 52.5% in Kenya and 22% in Rwanda and Tanzania. More than half of the population earns less than about $40 per month, and 91% of adults receive income in cash. Formal account ownership nevertheless reached 68% in 2023, driven largely by mobile money, and digital lending grew from 0.2% of GDP in late 2021 to 1.9% in late 2024.
To address these gaps, the IMF recommends stronger credit-reporting systems, improved financial and digital literacy, greater consumer protection, and increased mobilisation of long-term savings. It also calls for deeper capital markets, better financial reporting among smaller businesses, and participation of fintech companies in credit-information systems.
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