Bank of Uganda Overhauls Small Business Fund, Raises Loan Limit to Sh500m
Central bank scraps restrictive eligibility rules in bid to boost uptake of struggling initiative
Bank of Uganda has introduced sweeping changes to the Small Business Fund (SBF), raising the maximum loan size to sh500 million and opening eligibility to all small businesses capable of repayment, in a major overhaul aimed at reviving an initiative that has struggled to gain traction since its launch in 2021.
The central bank has scrapped previous thresholds that limited access to firms employing between five and 49 people with annual turnovers of sh10 million to sh100 million, and removed the requirement that businesses must have existed before the COVID-19 pandemic.
“Open the Fund to all small businesses and not limit it to pre-covid pandemic existing businesses, exclude the thresholds on sales and asset turnover, increase maximum loan amount from sh200m up to sh500m,” the central bank said in a memorandum outlining amendments following consultations with Participating Financial Institutions and the finance ministry.
The pricing remains capped at 10 per cent per year, calculated on a reducing balance, which lowers the effective cost for borrowers over time. Businesses can now access funds for up to four years, with a grace period of as much as one year—a structure experts say is particularly suited to firms with uneven cash flows, such as schools, traders, or construction businesses.
Repeat Borrowing and Debt Consolidation
Under the previous framework, firms could access the facility only once. The revised terms now permit repeat borrowing, provided existing obligations are fully serviced and the borrower can support additional debt.
The fund also allows debt consolidation, enabling businesses to use a portion of the loan to settle existing commercial borrowing, potentially replacing higher-interest debt with cheaper funding capped at 10 per cent.
The name change from Small Business Recovery Fund (SBRF) to Small Business Fund (SBF) reflects a shift away from the post-pandemic recovery focus that had defined the initiative since its inception.
Industry Reaction
The Federation of Small and Medium-Size Enterprises welcomed the changes, noting that COVID-19 should no longer serve as a benchmark for eligibility.
“After many years, we can no longer use COVID-19 as a benchmark. Some of the businesses that were affected should have recovered by now,” said John Wulage, executive director of the federation. “The changes in terms of turnover are welcome. Increasing the maximum loan to sh500m is good because it will bring in more smaller companies that need the money.”
Wulage also expressed support for the inclusion of SACCOs among participating institutions, describing it as “a good incentive for them to get the licences.”
Joseph Lutwana, director of research and insights at Financial Sector Deepening Uganda (FSD Uganda), said the amendments would expand access but cautioned that liquidity alone was not a complete solution.
“The amendments will expand access and capture of the small businesses,” Lutwana said. “But liquidity is just one of the remedies. Some businesses don’t have viable business models. The fund needs to be integrated with programmes that focus on markets such as the innovation hubs and skilling centres. That way, we will be able to see the lasting impact to small businesses.”
Limited Participation and Remaining Constraints
Although all supervised financial institutions—from commercial banks to microfinance deposit-taking institutions—are eligible to participate, only about 10 were active by the end of 2025. The central bank hopes that loosened eligibility and the inclusion of tier 4 institutions will deepen reach, particularly in underserved areas where formal banking penetration remains thin.
Bank of Uganda Governor Michael Atingi-Ego said the fund had so far extended sh72.4 billion to 3,640 enterprises across Uganda, supporting pharmacies, schools, hotels, hardware shops, and small traders.
“We are simplifying eligibility criteria, strengthening financial literacy programmes, urging banks to serve every region equitably, enabling repeat borrowing for sustained growth and intensifying awareness campaigns,” Atingi-Ego said during a town hall meeting in the Busoga region on March 7. “The funds exist. The terms are favourable. The only missing ingredient is you.”
Some constraints remain. Loans must be adequately secured, with collateral requirements determined by each lending institution. Agricultural projects remain excluded, as they are covered under a separate Agricultural Credit Facility—a division that experts say may avoid duplication but fragments access for businesses that straddle multiple sectors.
For loan amounts below sh20 million, participating financial institutions may consider alternative collateral and submit applications under a block allocation arrangement, according to the central bank.
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