From Challenges to Champions: How Uganda’s SMEs Can Stay Afloat

When Kalisto Okullo, a young entrepreneur in Mbale City, lost his agent banking job during the Covid-19 lockdowns, he turned adversity into opportunity. Out of that disruption, he founded Listo Foods Enterprises, a flour business producing value-added soya, millet, and composite flour.

Like many Ugandan entrepreneurs, Okullo dreams big. He hopes to build a strong, sustainable brand that will endure for generations.

“When I look at people like Maganjo Millers and other big companies, I strive to be like them,” he says.

Yet, like countless small and medium enterprises (SMEs), his ambitions are weighed down by limited capital, regulatory hurdles, and compliance challenges. His business remains his sole source of livelihood, making growth both urgent and risky.

SMEs: Uganda’s Economic Backbone

SMEs form the backbone of Uganda’s economy. They account for over 90 percent of the private sector, employ millions of Ugandans, and contribute more than 80 percent of the country’s GDP.

Despite their importance, survival remains elusive. A study titled “Survival of Uganda’s Small and Medium Enterprises in a Cox Model” found that most SMEs do not survive beyond five years, with a median lifespan of 4.85 years.

The challenges are familiar: limited access to finance, compliance costs, competition from imports, and economic volatility.

Government Interventions — Progress and Gaps

To strengthen enterprise resilience, government has invested more than Shs8 trillion in wealth creation initiatives targeting the informal sector. These include:

• Parish Development Model (PDM)
• Emyooga
• Youth Livelihood Programme
• Small Business Recovery Fund (SBRF)
• Youth Venture Capital Fund
• Value-addition financing through Uganda Development Bank (UDB)

Yet many SMEs continue to struggle.

According to Joshua Mutambi, Commissioner and Head of Processing and Marketing at the Ministry of Trade, Industry and Cooperatives, access to finance remains a major barrier.

“Most SMEs barely have collateral, their books of accounts are not in order, and they lack a borrowing track record. This makes it difficult to access loans,” he explains.

Financing Options and What Lenders Look For

Government financing mechanisms are channelled through commercial banks, UDB, and other institutions to support technology acquisition and business expansion.

However, lenders assess businesses on:

• Financial records
• Operational history
• Borrowing and repayment capacity
• Availability of collateral

In partnership with JICA and other international agencies, government is also supporting startups through training, matchmaking, and business-to-business linkages coordinated at district level.

The Role of Accelerators and Banks

Private sector initiatives are also stepping in. Maureen Nagasha, Communications and Events Manager at DFCU Bank, notes that the DFCU Rising Woman Accelerator has trained over 60,000 women entrepreneurs, awarding more than Shs120 million in seed capital.

Outstanding participants have received up to Shs10 million each, while others have benefited from fully funded regional study tours to Nairobi to learn scalable business models.

Uganda Development Bank and Long-Term Resilience

Uganda Development Bank currently supports over 770 projects in 103 districts, with a strong focus on agriculture, agro-industrialisation, manufacturing, and climate-resilient infrastructure.

“Our financing is structured with grace periods aligned to business cycles, allowing enterprises time to establish stable cash flows,” says Faith Birungi, UDB’s Digital Communications Officer.

Beyond financing, UDB supports market access, value addition, and sector-specific growth strategies, helping businesses survive well beyond the critical five-year mark.

The Rules of Survival

According to Charles Ocici, Executive Director of Enterprise Uganda, SMEs that hope to endure must obey two fundamental laws of business.

First, sell a solution that truly meets customer needs.

“You should ask yourself: yesterday I got a buyer, why hasn’t he come back?” he advises.

Second, be ready to compete.

“If competition is not your part of the game, no amount of prayer or cheap finance will save you. The price is on you, the seller,” he warns.

Venture Capital as a Game-Changer

For Edward Isingoma of Pearl Capital Partners, private equity and venture capital offer a more sustainable path for SMEs seeking scale.

“Capital investments are often needed when businesses introduce new products, expand to new locations, or increase volumes. Growth cannot rely on internally generated profits alone,” he explains.

With investment horizons of 10 to 12 years, venture capital allows businesses time to grow, stabilise, and thrive even after investors exit.

Sustainability and Green Growth

Ocici also believes sustainability must be part of SME growth.

“When communities understand that environmentally friendly products fetch higher prices internationally, no one will destroy those resources,” he says.

UDB reinforces this approach by ensuring all financed projects undergo environmental and social impact assessments, while supporting green production, efficient resource use, and sustainable waste management.

From Survival to Strength

Uganda’s SMEs face an uphill task, shaped by financing gaps, climate change, and global economic disruptions. But with coordinated support, disciplined business practices, and access to patient capital, resilience is possible.

Platforms like the MSME Symposium & Expo 2025 aim to bring together policymakers, financiers, and entrepreneurs to turn small enterprises into enduring champions of Uganda’s economy.