The Minister of State for Industry, David Bahati, admits that the currently available financing solutions at commercial banks are too costly for the manufacturing sector.
Bahati asked commercial financial institutions to establish innovative financing solutions for the manufacturing sector, if they are to boost the growth of the sector.
He was officiating the Uganda Manufacturers Association (UMA) 2nd Financial Symposium at Lugogo, held under the theme “Innovative Financing Solutions for Sustainable Manufacturing Sector.”
According to the Minister, with interest rates ranging between 17 to 23 percent, Uganda has the highest interest rates in Sub-Saharan Africa, hence the appeal to commercial banks to be considerate to manufacturers.
“The cost of money has become a big problem, and we are doing what we can; we are financing Uganda Development Bank (UDB), we have INVITE, Agriculture Credit Facility, all these are aimed at bringing the cost of capital down,” he told the business community.
But, he said, the government was working to ensure that state-controlled banks to see that the internal rate of return for a manufacturer is not beyond 12 percent.
“We are appealing to them to have specific funding for manufacturers. We are appealing to banks to lower interest rates so that manufacturers can access money and grow our economy,” said Bahati.
On the issue of electricity tariffs, the minister pledged government intention to ensure lower tariffs to the most affordable rates.
“They used to be close to 18 US Cents, but it has been reduced to about 5.7 Cents,” he said.
Aga Sekalala Jr, the UMA Board Chairman, said manufacturing was a pivotal driver towards job creation, with over 2 million people employed in the sector.
However, he said the sector continued to face challenges of high commercial lending rates and limited development financing options.
“Addressing these requires policy advocacy and collaborative efforts,” he said.
Godfrey Ssebaana, Diamond Trust Bank’s Chief Executive Officer, called for a paradigm shift in how Uganda finances its manufacturing sector, arguing that if Uganda were to unlock its full industrial potential, it should fundamentally rethink the financial architecture supporting its manufacturers.
“Uganda’s industrial sector holds the promise to transition us from a raw-materials-based economy to one grounded in productivity, innovation, and resilience. But this transformation will not happen unless we address the deep-rooted financing challenge,” Ssebaana said.
He identified limited access to affordable credit, a chronic shortage of long-term capital, and a lack of customised financial products as the primary barriers holding the sector back.
He also called for an urgent need for bold financial innovation, blended finance and patient capital, advocating for hybrid financing models that combine concessional funding with private sector investment.
“These models are essential to de-risk high-impact projects in green manufacturing, agro-processing, and light engineering sectors that are pivotal for driving sustainable industrial growth.”
Ssebaana called for enhanced capacity and capital for institutions such as the Uganda Development Bank (UDB), Uganda Development Corporation (UDC), and the Agricultural Credit Facility, urging them to offer long-term, accessible financing solutions tailored to the unique needs of manufacturers.
He also emphasised Green Financing, stressing that Uganda must align with global market shifts toward carbon neutrality, encouraging manufacturers to adopt forward-looking tools like green bonds, climate insurance, and sustainability-linked loans to finance investments in clean energy, water conservation, and environmentally friendly technologies.
Ssebaana notes the growing importance of Fintech solutions, particularly in bridging the financing gap for small and medium-sized enterprises (SMEs).
“Digital finance platforms can revolutionize supply chain financing and mobile lending, but only if supported by progressive, enabling regulation,” he said, adding, “Collectively, these innovations represent the foundation of a financial system that not only funds growth but also fosters resilience, inclusivity, and sustainability in Uganda’s industrial sector.”
Irene Mutyaba Kabiri, the Corporate Banking Director at Absa Bank Uganda, said sometimes manufacturers incur high interest rates due to the component of loan tenure, financial discipline in terms of utilising credit facilities, and the level of credit profile.
“The other issue is about planning; most times, the manufacturer will come to you for financing when planning was not done end-to-end, so the bank ends up structuring the credit facility out of the assets cycle, and that’s where problems begin in terms of high interest rates,” she stated.
She proposed building a good track record, corporate Governance, and financial discipline for entities.
“So, as commercial institutions, we come in to understand what you want to do, as you plan your cycles, very important to understand where you are and where you want to go, and what form of assets you are investing in, because all these have different tenures. If you want to do an expansion, that’s a term loan, but it should be aligned with when you are going to be in production.”
Dickson Ssembuya, the Director of Research and Market Development at the Capital Markets Authority (CMA), said the agency is reviewing the legal framework to facilitate innovative credit products such as green financing to ease access to financing.
“Are you involved in green business? As CMA, we are providing a facilitative framework, and the whole idea is to make it as easy as possible. Your business has to be attractive, should have sound systems, and be well-planned,” he said.
According to the Bank of Uganda (BOU) reports, in the 15-year period, credit to the manufacturing sector grew from 364 Billion to 2.4 Trillion Shillings; a 553 percent growth.
The manufacturing sector accounted for 12 percent of total bank lending by the end of December 2022.
The Uganda Bankers Association report indicates that food, beverages, and tobacco account for 35 percent of the total bank lending to the manufacturing sector, followed by chemicals, pharmaceuticals, plastic and rubber products, and basic and fabricated non-metal and metal Products which account for 11 percent each of the total lending to the manufacturing sector.