Entrepreneurship is the lifeblood of Uganda's economy, most especially for the youth. As over 78% of the population is aged below 30 years, several young Ugandans are looking to small business as an exit from unemployment. But for most would-be entrepreneurs, access to finance is an all-too-real stumbling block. A paltry 15% of Uganda's micro and small enterprises get finance from formal institutions, typically because they are not collateralized, are informal enterprises, or have a bad credit record.
Savings are a strong, underleveraged solution to this financing gap.
For the majority of Ugandan entrepreneurs, individual or group savings are literally the backbone of their businesses. Savings cover start-up costs, level out financial shocks, and build credit with lenders. Entrepreneurs who consistently save small sums of money demonstrate financial discipline, which can earn them support from microfinance institutions or mobile lenders. As new finance models such as asset-based lending and crowdfunding become available, saving acts as an essential factor to help entrepreneurs gear up for this prospect.
Savings also fuel reinvestment and expansion. As small businesses grow, they generate income that can be saved and invested back into business in a growth cycle, stability, and long-term wealth.
This relationship between savings and entrepreneurship directly addresses Uganda's national imperative of raising its domestic savings-to-GDP ratio from 11% to 25%. Every shilling saved and reinvested by a local entrepreneur builds individual wealth and national economic strength.
To tap this potential to its maximum, Uganda must cultivate policies that encourage entrepreneurship and savings. These steps involve simplifying business registration, expanding financial education programs, and strengthening rural financial systems. By recognizing savings as the genesis of innovation and self-employment, Uganda can turn its entrepreneurial culture into a force to be contended with for inclusive economic growth from street stalls and mobile kiosks to factories and farms across the country.
