Formalization agenda underpins Uganda’s credit deepening

Uganda’s plan to register 235,000 new businesses in FY2025/26 elevates formalization from administrative clean-up to macro policy. The Uganda Registration Services Bureau targets roughly 137,000 business names and 98,000 companies via mobile clinics and digitized workflows, expanding state reach into a large informal base.

The drive sits within a multi-year objective to register more than two million enterprises by 2030 and unfolds against a firmer backdrop: real GDP growth projected around 6.0–6.2% in FY2025/26 after a solid FY2024/25 outturn, headline inflation at 4.0% year on year in September 2025, and the Bank of Uganda holding the policy rate at 9.75% since August. With public debt near 51–52% of GDP and domestic revenue still below the Sub-Saharan average, the campaign seeks elasticity—more registrants, more compliance surfaces, and broader collateral for credit.

Mechanically, registration converts firms into bankable legal entities. It enables transaction accounts, movable-asset collateralization under the secured-transactions framework, and enforceable contracts across supply chains. As registry data feeds tax and identity systems, lenders gain better information for underwriting, compressing SME risk premia and improving loan pricing.

The operational design matters: mobile teams cut origination friction; post-registration outreach raises survival and compliance, countering the dormancy that undermined earlier regional efforts. Integration with licensing portals further reduces bureaucratic attrition that pushes firms back into informality.

The fiscal channel is gradual but cumulative. A cohort of 235,000 registrants, even at modest average turnover, represents a substantial declared base for non-tax revenue and targeted compliance. Near-term budget impact will be small, but structural effects compound as payment histories, e-invoicing, and renewals harden the compliance spine.

That, in turn, reduces reliance on domestic borrowing when yields are elevated—the 10-year benchmark hovers near 17%—and debt service absorbs a rising share of revenue. A broader taxpayer registry improves revenue predictability, stabilizes issuance calendars, and narrows the crowding-out wedge that has constrained private credit.

Credit intermediation is the second-order payoff. As more firms gain legal status and clean data trails, banks can extend working capital with lower loss-given-default assumptions. Listed lenders on the Uganda Securities Exchange, including SBU and DFCU, are positioned to benefit from a larger, data-rich SME funnel. A shift in private-sector credit growth from high single digits toward low double digits, with nonperforming loans contained and loan durations matched to deposit tenors, would lift asset yields without straining capital. Over time, a deeper documented SME segment broadens securitization potential and supports local-currency issuance backed by trade receivables.

Comparative experience sets the guardrails. Kenya’s service centers drove registration volume but underdelivered on durable compliance; Ghana’s digital reforms boosted convenience yet produced modest incremental revenue. Uganda’s differentiator is institutional integration—registry, tax, AML, and identity systems linked to reduce leakage and align incentives.

The program also aligns with payments modernization, lowering cash-handling costs and formalizing receipts. In this configuration, formalization is not a headcount race but a pipeline that converts registrations into bankable, taxable, and contractible entities.

Markets will judge on delivery, not declarations. Frontier risk proxies such as EMB and Africa equity exposure via AFK tightened in 2025, but Uganda’s spread compression will endure only if formalization yields measurable fiscal and credit gains. With growth steady near 6%, inflation contained near 4%, and the policy rate anchored at 9.75%, the macro mix supports gradual credit deepening provided domestic financing needs do not re-widen. A successful rollout would strengthen Uganda’s credit narrative, ease debt-service pressure, and raise visibility for sovereign-linked instruments and bank equities.

The forward test is explicit. By Q4-2026, confirm traction if at least 60% of newly registered firms remain active 12 months post-registration, incremental tax and non-tax receipts attributable to the drive exceed UGX 10–15 billion annually, and SME credit expands by at least 15% year on year.

Stable inflation near 4% and an unchanged policy rate would validate monetary conditions that allow credit to scale. Falling short—high dormancy, weak receipts, flat SME credit—would signal volume without yield, leaving the funding mix skewed to costly domestic borrowing and deferring gains in institutional credibility.