Rethinking credit access: A banker’s perspective on smarter borrowing

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OPINION

By Irene Mutyaba Kabiri

At the recently concluded Uganda Manufacturers Association (UMA) Financial Symposium, manufacturers from across the country voiced a recurring concern: limited access to affordable credit. While high interest rates and short loan maturities remain valid issues, another often overlooked but critical factor emerged; the role of a strong credit profile in determining financing outcomes.

Uganda’s economy is powered by Small Micro and Medium Enterprises (SMMEs), many of which struggle to expand due to constrained access to capital. A post-COVID-19 study by the Economic Policy Research Centre (EPRC) revealed that 69% of businesses reported a decline in credit access, and over 50% faced reductions in the amount of credit available. These figures are telling, and they point to the need for both systemic reforms and borrower-side financial empowerment.

One way businesses can improve their financing experience is by understanding and strengthening their credit profile, essentially, their financial reputation in the eyes of lenders.

A credit profile comprises two key components: your credit score and your credit report. Your credit score or grading is usually dependent on a financial institution’s scoring system that takes into consideration the quantitative and qualitative aspects of a borrower and reflects how reliable you are in meeting debt obligations. Your credit report, for example, the Credit Reference Bureau report, contains details such as payment history, credit utilisation, outstanding loans, and any defaults or delays.

For lenders, this information forms the basis of risk assessment. For borrowers, it is a negotiation tool. A strong credit profile signals financial discipline, lowers perceived risk, and opens doors to better financing options, including lower interest rates, higher loan amounts, and more flexible terms.

Four ways a strong credit profile works for you;

1. Favourable interest rates: Lenders reward low-risk borrowers with better pricing. A clean repayment history and low credit utilisation can reduce the cost of borrowing significantly.
2. Access to larger loan amounts: Financial institutions are more comfortable extending higher credit limits to businesses that have consistently demonstrated good financial management.
3. Flexible loan terms: Businesses with solid credit profiles often secure longer tenors and customised repayment schedules, reducing the strain on cash flows.
4. Lower collateral requirements: Strong credit reduces the need for heavy collateral. In some cases, it enables access to unsecured or partially secured loans.

Building a finance-ready business

Beyond the numbers, effective loan management starts with sound business planning. Businesses should aim for:

• End-to-end planning of financing needs, ensuring loans are structured in alignment with business milestones such as production start dates, asset depreciation, or revenue cycles.
• Robust governance and financial discipline, enhance transparency and build long-term lender confidence.

At Absa Bank Uganda, we believe our role goes beyond lending. We see ourselves as partners in our clients' growth journeys. Our teams take the time to understand your business goals, assess the asset types you're investing in, and recommend financing solutions aligned to your cash flow and operational realities.

For example, if a manufacturer is investing in plant expansion, that’s a capital-intensive program, we’ll structure a term loan in the form of Commercial Asset Finance (CAF) that aligns with the expected production and payback cycle. If they are investing in warehouses or brick and mortar, we shall draw on our Commercial Property finance (CPF) to align with their cash flows. Our goal is to support growth sustainably and ensure we understand the client’s business end-to-end.

The conversation about improving access to credit must be all-encompassing to include interest rates, tenor, and regulatory reforms, but we must also talk about financial reputation credibility. A good credit profile is one of the most powerful tools a business can have when walking into a negotiation room.

With greater financial awareness, partnership, and discipline, Ugandan businesses can unlock better financing outcomes and drive the kind of growth our economy urgently needs.

The writer is the Corporate Banking Director, Absa Bank Uganda