Commercial banks in Uganda are charging higher interest rates on shilling‑denominated loans, even as the Bank of Uganda (BoU) keeps its key policy rate steady.

According to BoU data, the weighted average lending rate for shilling‑denominated loans stood at 18.2% for the 2024/25 financial year. By July 2025, the rate had climbed to 19.65%, up from around 19.07% in June. In contrast, foreign‑currency‑denominated loans averaged 8.35% in July, down slightly from 8.78% in June.

Despite rising borrowing costs, private sector credit remains on a growth trajectory. The stock of private sector loans reached UGX 23.90 trillion in July 2025, up from UGX 21.9 trillion a year earlier, reflecting annual growth of roughly 9.1%. However, short‑term trends show a small decline of about 0.5% from June, attributed to marginal reductions in both shilling‑ and foreign‑currency credit segments.

The Central Bank Rate (CBR), Uganda’s benchmark policy rate, has been held steady at 9.75%, signaling the BoU’s cautious approach to maintaining macroeconomic stability.

Lending rates vary significantly across sectors. Agriculture recorded the highest average shilling‑loan rate at 21.2%, followed by Mining (21.7%) and Electricity & Water (20.5%). Lower rates were observed in Transport & Communication (15%), Manufacturing (16.8%), and Trade (17.9%).

Economists say the rising cost of borrowing reflects heightened risk perceptions in certain sectors, coupled with efforts by banks to manage credit quality. “The private sector continues to grow, but businesses face higher financing costs, particularly in agriculture and energy,” said a local banking analyst.

While short-term fluctuations in private sector credit stock have been observed, the broader trend suggests a resilient credit market, supported by steady policy rates and gradual economic expansion.

As Uganda navigates both domestic and global financial uncertainties, analysts expect banks to remain cautious on lending while continuing to provide critical credit to key sectors of the economy.