Access to Finance
SMEs defined as the ‘missing middle’ are the economic backbone of virtually every economy in the world and account for more than 50% of jobs and more than 35% of Gross Domestic Product (GDP) in many emerging markets. Despite all these benefits, SMEs remain significantly under served by the financial institutions. High interest rates, complex requirements and over reliance on collateral constrains their access to finance. There is need therefore for a joint effort between the banks, the Central Bank and Government to innovate and enhance the capacity of Uganda’s private sector to explore other alternative ways of financing operations. Uganda government has made several provisions to allow businesses of all sizes to tap into flexible capital over longer tenures than bank finance – and this via capital markets and private equity. However, despite this, the uptake of these alternative options is negligible at best, with market capitalization of the local counters of Uganda Stock Exchange at just 3.4% of GDP. There is need to support both the private sector and the financial sector to increase the uptake of alternative financial products.