Over 700,000 market vendors to benefit from collateral-free Katale Loan

__________________

Thousands of market vendors in Kampala who have long been locked out of formal banking are set to access affordable, collateral-free credit under a new shillings 10 billion government financing initiative dubbed the Katale Loan.

The programme, which targets informal traders operating without bank accounts, land titles or other assets required by commercial lenders, is being piloted in six major markets: Owino, Kalerwe, Busega, Rubaga, Ggaba and Nakasero. Over 700,000 vendors across the city are expected to benefit once the initiative is fully rolled out.

The revelation was made by senior presidential advisor in charge of political mobilisation, Moses Byaruhanga, during a meeting convened by State House officials at Kolping Hotel in Kampala on January 4, 2025. The event was attended by over 150 market leaders.

Byaruhanga said the loan is designed to address long-standing barriers that have prevented market vendors from accessing affordable financing, forcing many to rely on exploitative moneylenders.

“Most market vendors do not qualify for bank loans because they lack collateral and formal documentation. This programme is meant to reach those people directly,” he said.

Under the Katale Loan, vendors will access financing directly on their mobile phones through electronic payments at an interest rate of eight per cent per annum, calculated on a reducing balance. This means borrowers pay less interest over time as they make repayments, significantly lowering the overall cost of the loan.

“For instance, if someone borrows shillings one million, the interest for the year would be 80,000. But because the balance reduces with repayment, the total interest paid may fall to between Sh50,000 and Sh60,000,” Byaruhanga said.

Unlike commercial bank loans, the Katale Loan does not require physical collateral. Instead, traders are organised into groups within their respective markets, where members guarantee one another. Government officials say this group-lending model is more suited to the realities of informal trade and helps reduce default risk without excluding vulnerable borrowers.

The programme marks a shift in the government’s approach to financing the informal sector. Previously, funds were channelled through Savings and Credit Co-operatives (SACCOs) and Emyooga groups, but authorities say the model faced setbacks due to mismanagement and elite capture.

“In some cases, leaders lent the money to themselves instead of the intended beneficiaries. That is why the Government decided to take this money directly to the people in the markets,” Byaruhanga said.

While the Katale Loan is being tested in selected markets, Byaruhanga said Emyooga groups in other areas will continue to receive funding, provided they demonstrate accountability and good performance.

Initiative welcomed

Market leaders welcomed the initiative, saying it could ease the chronic shortage of working capital that limits business growth among vendors.

Joseph Mudhasi, the co-ordinator for Nakawa Market, said the loan would benefit more than 30,000 traders operating in the market.

“This programme has come to improve our livelihoods and working conditions. Many vendors fail to expand simply because they cannot access affordable credit,” Mudhasi said.

He added that the low interest rate and grace period make the loan attractive to traders who operate on thin margins.

“The interest is only eight per cent over 12 months, and in the first month you do not pay any interest. You start paying interest in the second month,” he said.

Women traders, who make up the majority in many markets, are expected to be among the biggest beneficiaries. Immaculate Kabugho, a vendor from Hajji Atimuluya Market in Kalerwe, said many women have depended on high-interest informal lenders due to a lack of capital.

“Women are very active in the markets, buying and selling every day, but many struggle to raise enough capital to sustain their businesses,” she said.

The funds will be disbursed through the Microfinance Support Centre (MSC), whose communications manager, Tadeo Atuhura, said vendors will be eligible to borrow between shillings 50,000 and two million, depending on the size and capacity of their businesses.

He added that MSC staff have already been deployed to the pilot markets to work directly with vendors alongside market leaders.

“This is intended to protect vendors from fraudsters who may pretend to be our staff and exploit people desperate for the money,” Atuhura said.

Government officials say if the pilot succeeds, the Katale Loan could become a major financing lifeline for Kampala’s informal economy, bringing thousands of unbanked traders into affordable and structured credit for the first time.