Ojangole: Why Businesses Aren’t Ready for Loans
Businesses not ready for loans is a major challenge in Uganda. Ojangole, chairperson of Uganda Development Bank (UDB) and the Association of African Development Finance Institutions (DFIs), highlights the struggle many businesses face in accessing long-term finance. Despite the availability of funds, businesses often lack the readiness to tap into these resources effectively.
Read Also
Sudan RSF Attack on El Fasher Camp Kills 40
Niger Nationalises SML Gold Mine Under General Tiani
Demand-Side Barriers to Loan Access
Ojangole notes that capital is available, but businesses aren’t equipped to access it. Uganda’s banking sector is well-capitalized, and funding from bilateral and multilateral sources is plentiful. The challenge lies in how businesses prepare to access the capital. Many SMEs fail to meet the criteria for securing loans, creating a demand-side problem.
To address this, UDB has adopted a proactive strategy. It offers advisory services and programs like the Business Accelerator for Entrepreneurship (BASE). These services help SMEs become more attractive to investors by improving their loan readiness.
The Role of Development Finance Institutions (DFIs)
Development Finance Institutions (DFIs), such as UDB, play a vital role in addressing market gaps and supporting sectors that the private market might overlook. Ojangole emphasizes that DFIs help channel finance into critical sectors like agriculture, infrastructure, and manufacturing. These sectors are key to Uganda’s economic growth and job creation.
DFIs also work alongside the government to accelerate industrialization. By focusing on sectors with the highest return potential, UDB can drive social and economic transformation in Uganda.
Financial Literacy and Business Readiness
Ojangole identifies financial literacy as a key obstacle for businesses in Uganda. Many entrepreneurs focus on short-term survival rather than long-term growth. This mindset makes it difficult for businesses to prepare for and access long-term financing.
To make businesses loan-ready, they need to understand the necessary steps. UDB helps businesses by providing guidance from the beginning, ensuring they have solid business plans, financial documentation, and a strategy for utilizing capital effectively.
UDB’s Focus on Key Sectors
UDB’s lending strategy aligns with Uganda’s National Development Plan. The bank focuses on sectors with the highest potential for economic return, such as agriculture, agro-industry, manufacturing, and infrastructure. By prioritizing these sectors, UDB aims to create a lasting impact on Uganda’s economy.
The bank’s assets have grown to Shs1.78 trillion, and its loan book stands at Shs1.53 trillion. However, to meet the growing demand for long-term credit, more capital is needed.
The Need for a Stronger Safety Net
Ojangole suggests that Uganda needs a stronger social safety net to boost consumer confidence. Public policy should provide protections that help mitigate the risks of economic volatility. Ojangole also urges more government support for DFIs like UDB to ensure they can meet the increasing demand for financing.
Conclusion
The challenge of businesses not being ready for loans stems not only from the availability of capital but also from a lack of preparation. By offering advisory services and promoting financial literacy, UDB is helping businesses become ready for loans.
With the right approach, Uganda’s private sector can unlock the full potential of available funding, turning windfalls into sustainable growth and long-term success.
