Finance Minister Urges Banks to Lower Lending Rates for Economic Growth

Finance Minister Henry Musasizi is pressing commercial banks to make credit more accessible and affordable to drive Uganda’s ambitious goal of achieving a US$500 billion economy by 2040. Speaking at the 9th Annual Bankers Conference, Musasizi emphasized that government funding alone is insufficient to meet the required investment scale.

He urged banks to lower average lending rates, currently between 18% and 20%, and to develop longer-term financing solutions crucial for sectors like agriculture, tourism, minerals, oil and gas, manufacturing, and technology. The minister highlighted the need to shift focus from predominantly trade financing to these productive sectors.

Musasizi also encouraged stronger collaboration between commercial banks and the Capital Markets Authority to explore alternative funding avenues such as infrastructure, project, and green bonds, as well as equity financing. These instruments could complement traditional bank loans for capital-intensive projects.

The government aims to significantly increase private sector credit from approximately Shs28 trillion to Shs490 trillion by 2040, with capital markets mobilization rising from Shs1.5 trillion to Shs440 trillion.

Bank of Uganda Governor Michael Atingi-Ego stressed the importance of maintaining financial stability amidst credit expansion, advocating for a greater role for pension funds, insurance companies, and development finance institutions in supplying long-term funding. He also called for measurable strategies to finance key sectors and translate commitments into actual investments.

The conference underscored the need for the financial sector to expand the pool of capital for the private sector and improve its structure and channeling into productive investments, moving beyond traditional commercial lending to mobilize patient, long-term capital. This shift is essential for investments that require extended periods before yielding returns.

Source: Nile Post