By David Ssempijja
Financial literacy gaps in Uganda are largely responsible for the short lifespan of most enterprises particularly those falling under the Small and Medium Enterprises (SMEs) bracket, an enterprise development expert had observed.
Charles Ocici, the executive director Enterprise Uganda said that the country suffers from a wide financial education vacuum, landing young entrepreneurs into the dilemma of making ill-informed decisions about money.
“We need to seek first the financial wisdom; this step is believed to be a cardinal stepping stone in trying to strengthen the establishment and sustainability of enterprises,” he said while training over 600 entrepreneurs in Business and Enterprise Start-up Tool techniques at Luzira recently.
In Uganda 80% of all business are SMEs; however the bad news is that they do not reach their first anniversary where quarter of them collapse in their first six months of existence.
“Supporting business growth must entail an element of financial literacy to empower people with the knowledge, skills and confidence to manage their business and personal finances well, taking into account their economic and social circumstances,” he said.
Ocici pointed out that deepening financial education should be spearheaded by Bank of Uganda with support from commercial banks, development partners among other agencies.
Charles Ocici, the executive director Enterprise Uganda talking to some of the participants
The most detrimental financial mistakes are made while securing bank loans to finance businesses, where the banks neglect the role of sensitising their customers on how to use the funds in a manner that can enable them run profitable businesses with the capacities to service the loans.
“People who are financially literate are able to make sound financial decisions for themselves and their families, make informed choices between different financial products and services available with different providers,” he added.
According to information with the Central Bank, only three million of Uganda’s 33 million people are banked and, on average, less than 20% of households have access to formal financial services, a case to a larger extent attributed to low levels of financial literacy because some people are not yet aware of the relevancy of banking.
The expert suggests that financial education suitable for entrepreneurs should include awareness about dealing with the challenges of difficulty in meeting eligibility for bank loans.
“Lowering these barriers to access and offering suitable financial products can allow households and small businesses to maximise the leverage of their savings or earnings for increased productivity, contributing to higher incomes, job-creation and growth,” Ocici added.