As we launched the Uganda Green Enterprise Finance Accelerator at the Uganda-Europe Business Forum in March this year, we shared our objectives of supporting enterprises to access tailored financing solutions for their enterprise and scale their impacts. As we design what the business development and financial support components of the programme look like, we have several questions in mind. Who is most likely to drive green growth in Uganda? How can we meet the needs of green enterprises to bring their visions to scale? What investments need to be made, in which sectors? And how can we engage with you, our community, to bring these objectives to fruition?
Below, we reflect on how we hope to answer these questions over the course of the programme. If you have ideas, insights, or want to start a conversation, send us an This email address is being protected from spambots. You need JavaScript enabled to view it. or comment on our Facebook page.
Who will drive green growth in Uganda?
With an objective of reaching Upper Middle-Income Status by 2040, the Uganda Vision 2040 aims to achieve an annual growth rate of 8.4% by 2025. A recent World Bank report notes that growth must translate into job creation, as around 700,000 youth reach working age each year in Uganda. This number is expected to reach one million a year between 2030-2040. For growth to be sustainable and contribute to a resilient and adapted environment, this growth and job creation must be driven through green products, services, and processes.
SMEs are well placed to drive this growth. According to the 2015 National Small Business Survey of Uganda, they contribute about 90% of private production and provide employment to over 2.5 million people. The UGEFA programme is designed to support small and medium enterprises to drive green growth. The question we are looking to answer through our programme is how different sectors contribute to green growth and job creation, and which business activities advance these growth goals?
→ Discover our current sector priorities on the UGEFA website
What is hindering SMEs from scaling their impacts?
To achieve growth in green sectors, we need both more SMEs, and more successful SMEs that are able to scale their impact and inspire others to follow suit. We have already seen examples of successful green enterprises that are bringing their products and services to scale, but how can we see more do the same? A 2018 study on the Uganda Entrepreneurial Ecosystem by Centre for Development Alternatives, Enterprise Uganda, and Koltai and Company showed several key constraints for enterprise growth. These include access to finance for moderate-growth SMEs, a lack of investment vehicles in the USD 20,000-300,000 range for high-growth SMEs, weak management skills and practices, lack of commercial viability for providing business development support to smaller SMEs, and a vicious cycle between financial records, informality, and tax burden.
Many SMEs that attempt to access external financing struggle to do so. According to the 2015 National Small Business Survey of Uganda, 41% of enterprises surveyed had previously applied for loans. Less than 4% of enterprises surveyed reported receiving start-up capital from banks. The question of why many SMEs are not able to fulfil loan requirements and what conditions could minimise that gap is a core focus of the UGEFA programme.
The UGEFA programme aims to increase green SME access to finance, offering a combination of non-financial support focused on financial readiness with facilitation of loans provided by partner banks that are tailored to the needs of green SMEs. As we implement the programme, we will test and adapt different loan mechanisms to better address the business development needs of SMEs.
Why do SMEs need financing?
SMEs require finance to keep their operations running despite gaps in their revenue streams (for example, due to seasonality), and to invest in growth of their enterprise. The finance required can cover a plurality of costs – such as salary expenditures, acquiring inputs for production, or paying rental and electricity bills – and investments – such as stocking up on inventory to respond to a large contract, investing in new machinery and equipment, or testing and designing a new product.
In the 2015 National Small Business Survey, 73% of respondents took a loan for working capital. 27% took a loan to invest in machinery/equipment, furniture, vehicles, trainings, or other reasons. At UGEFA, we look to support enterprises that use loans to invest in future growth and scale their impacts. We will support enterprises to assess their activities and growth plans, and to propose investments that will increase their scale.
→ What do you think the majority of those investments will look like? Have a say on our Facebook poll
How can we build insights as a community?
We recognise that supporting SMEs to drive green growth in Uganda will require the efforts of an entire ecosystem of stakeholders to provide different types of support at different life cycles of the enterprise. To support the sharing of insights and synergy of programmes, we will be hosting Green Finance Dialogues on an annual basis and provide platforms for peer exchange. We are also looking forward to bringing any insights and project details to events you are hosting, and exchanging ideas.
→ Do you have ideas for how we can engage with you? Get in touch with us at This email address is being protected from spambots. You need JavaScript enabled to view it. !
