We need new banking model for Uganda’s start-ups

What the report says

The Observer published a viewpoint arguing that Uganda’s banking sector should move away from a collateral-first lending model and create products designed for start-ups and first-time entrepreneurs. The author says banks should assess the viability of ideas and early effort, rather than requiring long operating histories or land titles before extending credit. The piece frames this as especially important for young businesses and informal enterprises across Uganda, including in places such as Karamoja, Katwe, Kyotera and Mbulamuti.

To support the argument, the article points to several international examples, including idea-based financing in Germany, sweat-equity style backing in postwar Japan, milestone-based disbursements associated with Silicon Valley-style venture funding, group guarantees used by Grameen Bank in Bangladesh, and contract-based lending practices the author associates with Rwanda. It also suggests banks should employ technical specialists who can judge whether a project is workable, such as engineers or agronomists, and should recognize non-traditional assets like equipment built or purchased through personal sacrifice.

The author calls on the Bank of Uganda to consider a start-up quota, saying a share of loan books should be directed to first-time builders and green projects. The broader point is that financing should focus more on potential, verified progress and community support than on established balance sheets alone. The argument matters because access to credit remains a major barrier for new businesses in Uganda, especially those without conventional collateral.