A new survey has revealed both the hurdles and the potential that lie ahead for Uganda in mobilizing private capital to support small and medium enterprises (SMEs).
The research, conducted by Financial Sector Deepening Uganda (FSDU) in partnership with Bethel Advisors, the East Africa Venture Capital and Private Equity Association (EAVCA), and the Deal Flow Facility (DFF) with support from the European Union, highlights how Uganda’s private capital market is evolving and where it falls short.
The report points to several systemic constraints. Many international funds operate under rigid mandates that limit their flexibility to invest in smaller, local businesses. At the same time, Ugandan SMEs often struggle with investment readiness, lacking scalable business models, reliable financial records, or the governance structures investors expect.
Difficulties in equity valuation, limited debt financing due to collateral issues, and disputes around “sweat equity” were also cited as sticking points. Investors face few viable exit routes, as secondary markets and IPOs remain underdeveloped. Meanwhile, pension funds and insurance companies prefer the safety of government securities, shying away from riskier private ventures.
Currency fluctuations and rising interest rates add another layer of risk. Even when tools such as credit guarantees exist, they remain underutilized because of concerns over moral hazard. The report further warns that technical assistance for SMEs is often one-off, when sustained support across the investment cycle is what is needed.
Despite these obstacles, the survey identifies promising interventions to unlock Uganda’s capital markets. Investor-readiness programmes that align SME capabilities with investor priorities could improve deal flow. Blended finance structures, mixing concessional, local, and international funding are seen as another path to reduce entry barriers.
The report calls for stronger intermediaries to bridge the gap between SMEs and funders, and for continuous post-investment technical support. Improved access to market data and analysis would also boost transparency and build investor confidence. On the policy front, coordinated government action could encourage more local capital to flow into private ventures.
The Deal Flow Facility, one of the initiatives behind the survey, has supported over 300 SMEs, prepared more than 60 for investment, and facilitated four successful deals, with more in the pipeline. A recent validation workshop underscored three central barriers: mismatched investment priorities, limited local capital, and weak ecosystem capacity.
The findings show that Uganda’s private capital sector is at a decisive moment. Without reforms, the barriers may continue to deter investment. But with targeted interventions especially in SME support, blended financing, and regulatory engagement the country could unlock new flows of capital to power enterprise growth and economic transformation.