High lending rates discouraging private sector-led growth
Uganda has defined a vision for middle income status with a per capita income of $1,039 (Shs3.7m). Given that Uganda is pursuing a private sector led strategy, the sector is pivotal to the realisation of this vision.
In order to achieve this vision, Financ minister Matia Kasaija said “…the availability and access to credit is therefore a pre-condition for the private sector to play its cardinal role in this process.”
Commercial banks hold about 80 per cent of the total assets in the financial system. Equity markets are poorly developed and only large firms can reliably raise funds from the equity markets. And as such most firms seeking finance and investment from the domestic market have to rely on the banking system.