Tapping into the MSME finance opportunity in Uganda

MSME lending is a small share of the loan book of formal financial institutions in Uganda even though MSMEs make up over 90% of private sector firms, account for about 60% of non-agricultural employment in the country and contribute more than 20% to Uganda’s GDP.

In a bid to understand the factors that constrain MSME finance in Uganda, the IFC commissioned Genesis to do a study of the general MSME landscape in the country, encompassing an analysis of the demand and supply-side of the MSME finance market.

The overall aim of the study was to understand the financial and non-financial needs of MSMEs in Uganda, both as a going concern and in light of the COVID-19 pandemic and compare this with financial institutions’ value proposition to MSMEs.

The Genesis team on the assignment conducted the necessary desktop research, held stakeholder interviews with a wide range of stakeholders and coordinated the administration of a national-level MSME survey.

The stakeholders interviewed included Tier I, II and III lenders, fintechs, private equity investors, NGOs and development institutions and government ministries and agencies. The survey was administered to over 800 MSMEs in the central, western and eastern regions and served as the principal source of primary data for the study. The project team then analysed the qualitative and quantitative primary data collected from stakeholder interviews and survey to generate insights and recommendations that addressed objectives of the study.

In a bid to enable the financial sector to realise the opportunity that lay in the MSME finance scene and understand how it can tap into it, the IFC disseminated the insights and recommendations from the study to the relevant stakeholders. Moreover, in line with the study recommendations the IFC is partnering with financial institutions to build their capacity to effectively and sustainably engage more in MSME finance.