MASAKA, September 8, 2026 — Lenders in the Greater Masaka have expressed dismay over the way some borrowers are using green loans to finance charcoal burning and the felling of trees for timber.
Those crying are the microfinance institutions in the area that continue to face repeated challenges while enforcing responsible lending practices aimed at protecting the environment.
The lenders attribute the challenge to limited public understanding of environmental requirements and resistance among borrowers, which they say is undermining efforts to promote green investments.
The majority of lenders say borrowers view environmental safeguards attached to loans as restrictive conditions intended to deny them access to credit, rather than measures designed to protect the environment and promote sustainable livelihoods.
Betty Mukasa, the Board Secretary of Ssese Oil Palm Growers Cooperative Limited [SOPGco] in Kalangala district, says limited public understanding of the Environmental, Social and Governance [ESG] framework is contributing to non-compliance and continued environmental degradation.
She notes that many clients consider environmental safeguards attached to loans unnecessary restrictions and bureaucratic requirements.
Uganda adopted the Environmental, the ESG framework of the United Nations in 2022, requiring institutions to embrace responsible business practices that support environmental sustainability and biodiversity conservation.
Subsequently, government directed financial institutions to implement the framework by avoiding financing activities that harm the environment or promote social and ethical exclusion.
Meanwhile, microfinance institutions report that enforcing the requirements remains difficult because some borrowers continue to engage in activities that degrade the environment, while others intentionally provide misleading information when applying for loans.
“There is a need for increased public sensitisation, particularly targeting local leaders who can help communities understand environmental regulations, adopt sustainable practices and identify violations,” Mukasa said.
The Head of Marketing and Customer Growth at Masaka Microfinance Development Cooperative Trust Limited [MAMIDECOT], Lydia Nalubwama, says some borrowers continue to divert loans to activities that contribute to environmental degradation despite efforts by lenders to enforce the policy.
“Clients use borrowed money for environmentally hazardous activities such as charcoal production and trading in timber and firewood, which contribute to deforestation,” she says.
Nalubwama stresses the need for increased sensitisation, particularly on green-energy alternatives, alongside stricter enforcement of environmental laws by government agencies.
The Manager of Sembabule Savings and Credit Cooperative Society Limited in Sembabule district, Daniel Kintu, says the Government should provide incentives to borrowers who comply with environmental lending requirements.
Kintu says such incentives could encourage more borrowers to adopt sustainable practices at a time when communities are increasingly experiencing the effects of environmental degradation, including prolonged droughts.
“Many communities remain reluctant to adopt recommended climate-change mitigation measures, requiring more proactive approaches to enforcing the ESG framework,” he says.
Meanwhile, the Manager of Financial Services Development at aBi Finance, David Kaweesa, says microfinance institutions should become more innovative and deliberately promote green financing.
“Borrowers are more likely to adopt environmentally friendly practices when sustainable alternatives are readily available, affordable and attractive,” he says, adding that “lenders should prioritise financial products that promote climate-change resilience to encourage borrowers to shift away from environmentally harmful activities.”
Kaweesa also called for increased public awareness campaigns targeting both lenders and borrowers, while urging the Government to create an environment that would enhance access to affordable green financing, which he says is critical to making the ESG framework effective at community level.
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