Experts weigh in on impact of microfinance

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While microfinance institutions are a vital source of credit for many businesses, experts say there is still a deliberate need for financial literacy to truly empower entrepreneurs and break the cycle of poverty across the country.

Jane Nalunga, Executive Director of SEATINI Uganda, says business training should be tailored to the individual and address the actual challenges affecting them.

"When it comes to accessing micro-loans, key things include cash flow, interest rate, and knowledge on investment. Borrowers should be mindful of interest rates by choosing microfinance companies with lower rates to avoid keeping people in the cycle of debt,” Nalunga noted.

Nalunga's views are equally shared by Robert Kakande, the Executive Director of FINCA Uganda, a Microfinance Deposit Institution who says entrepreneurs can manage their finances effectively by making informed decisions to avoid debt traps.

“We provide both financial services and training programs that equip entrepreneurs with crucial skills like budgeting, saving, and investing.  The impact of this approach is evident in the success of clients like the Nakawa market women's group,” says Kakande

He adds that their commitment to financial literacy has earned them recognition from Rotary Uganda, who recently awarded them a certificate for their impactful program.

Sarah Nangozi, a member of the group, shares how the training has transformed her life:

"I joined the group with a capital of sh300,000, and from the bookkeeping training I received, I was able to track my business growth. Now my business has a net worth of shs5million.”

In October 2024, FINCA Uganda was appreciated for its impactful financial literacy program for the Nakawa Market women group.

The FINCA team promised to continue working together with different people to improve living standards and build a brighter future for millions of Ugandans.

According to the 2023 Finscope survey, 81% of Ugandan adults now use financial products and services, highlighting the need for widespread financial literacy to ensure responsible and effective use of these tools.

It further shows that although 52% of the adult population are women, only 62% of them are formally included compared to 75% of men.

This gap represents a significant missed opportunity, especially given studies showing women to be loyal customers and good re-payers.