Uganda private-sector credit growth accelerates to 16.1 percent as lending rates fall
Private-sector credit growth averaged 13.80 percent in the three months to June, up from 11.53 percent in the three months to March, while growth reached 16.1 percent in June, signalling stronger borrowing activity by businesses and households
KAMPALA, September 20, 2026 — Lending to Uganda’s private sector accelerated sharply in the three months to June 2026, as commercial banks lowered interest rates on shilling-denominated loans and credit demand strengthened, according to the Bank of Uganda’s Monetary Policy Report for August 2026.
Private-sector credit growth averaged 13.80 percent in the three months to June, up from 11.53 percent in the three months to March, while growth reached 16.1 percent in June, signalling stronger borrowing activity by businesses and households.
The increase came alongside a decline in the average weighted lending rate on shilling-denominated loans, which fell to 17.73 percent from 18.65 percent over the same period. In June alone, the lending rate dropped to 16.9 percent, from 18.3 percent in May, its lowest level since April 2025.
The decline in borrowing costs was broad-based across several sectors. Lending rates for agriculture fell to 19.6 percent from 20.7 percent, trade to 17.0 percent from 17.8 percent, transport and communication to 14.8 percent from 16.0 percent, and housing to 18.8 percent from 20.0 percent.
Rates for mining and quarrying also declined to 17.9 percent from 19.6 percent, while personal loan rates fell to 18.4 percent from 19.0 percent. Manufacturing was one of the few sectors where borrowing costs increased, rising to 17.4 percent from 17.0 percent.
The Bank of Uganda [BoU] said the stronger credit growth was supported by increased lending in both local and foreign currencies. Shilling-denominated credit grew by an annualised 12.26 percent, compared with 11.19 percent previously, while foreign-currency loan growth accelerated to 18.32 percent from 12.52 percent.
Net credit extensions, including capitalised interest and valuation changes, nearly doubled to Shs 2.89 trillion, from Shs 1.44 trillion in the preceding three-month period.
Credit demand also increased significantly, rising to Shs10.47 trillion from Shs 8.47 trillion, while credit supply rose to Shs 6.42 trillion from Shs 4.92 trillion. The proportion of loan applications approved increased to 61.3 percent, from 58.0 percent.
The improvement in lending conditions was accompanied by a continued strengthening of banks’ asset quality. The ratio of non-performing loans to total gross loans declined to 2.67 percent in June, from 3.0 percent in March, reaching its lowest level since December 2011.
Despite the improvement in private-sector lending, the central bank maintained its Central Bank Rate [CBR] at 9.75 percent at its Monetary Policy Committee meeting on August 13, saying the current stance remained appropriate for maintaining price stability while allowing it to assess emerging economic risks.
Uganda’s annual headline inflation rose to 4.0 percent in July, from 3.7 percent in June, largely because of higher energy, fuel and utilities costs and rising food-crop prices. Core inflation, which excludes volatile items, remained at 3.4 percent, below the central bank’s 5 percent medium-term target.
BoU nevertheless expects inflationary pressures to build gradually, projecting headline inflation at 5.5–6.0 percent over the next 12 months and core inflation at 4.0–4.5 percent.
The central bank identified international oil-price volatility, geopolitical tensions in the Middle East, adverse weather conditions and stronger domestic demand as key upside risks to inflation.
Meanwhile, Uganda’s economy expanded by 6.4 percent in financial year 2025/26, up from 6.3 percent the previous year. BoU projects economic growth of 7.0–7.5 percent in FY2026/27, with growth expected to reach about 8 percent over the medium term, supported by oil production, investment, exports and other productive sectors.
The stronger domestic outlook comes as Uganda’s external position also improves. The country recorded a balance of payments surplus of US$ 2.39 billion in the 12 months to June 2026, more than double the US$ 1.03 billion recorded in the preceding year.
However, the shilling depreciated by 3.3 percent year-on-year in July to an average of Shs 3,704.51 against the US dollar, with BoU attributing recent pressure partly to market sentiment linked to renewed US-Iran tensions and increased corporate demand for foreign currency.
The Central Bank said Uganda’s macroeconomic outlook remains favourable but cautioned that geopolitical tensions, energy and food supply shocks, and tighter global financial conditions could affect the outlook.
https://thecooperator.news/bank-of-uganda-report-hails-national-economy-amid-global-uncertainty/
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