The Youth Dividend or the Youth Deficit? Why Uganda’s Financial System Must Adapt or Become Obsolete

There is a troubling assumption embedded within Uganda’s financial system: young people are simply not worth the risk.

To many banks, microfinance institutions and investors, young people represent a weak investment proposition. They often lack collateral, guarantors, credit histories and the financial portfolios that make established corporate clients attractive. Viewed through a traditional risk assessment lens, the numbers appear to justify this caution.

But perhaps we are asking the wrong question.

This is not a failure of Uganda’s youth. It is a failure of the financial system to evolve.

The economics of banking help explain why. Retail banking, which provides everyday services such as savings accounts, personal loans and mortgages, is costly. It requires extensive branch networks, staffing and operational infrastructure, yet typically generates lower returns than Corporate and Investment Banking (CIB).

Corporate banking offers larger transactions, stronger margins and greater alignment with institutional and cross-border business opportunities. It is therefore unsurprising that Standard Chartered Bank has announced it will exit retail banking in Uganda by the end of 2026. From a commercial standpoint, the decision makes strategic sense.

Before labelling an entire generation as “high risk,” we must first examine the realities young people face.

A Ugandan between the ages of 22 and 26 is often just beginning their economic journey. They are graduating from university or vocational training, searching for employment or launching their first business. Those fortunate enough to secure formal employment frequently earn between UGX 600,000 and UGX 1.5 million a month. Building meaningful savings or accumulating assets can take years, delaying the very financial history that lenders expect before extending credit.

It becomes a paradox: young people need capital to build financial credibility, yet they need financial credibility to access capital.

Despite these constraints, Uganda’s youth continue to demonstrate extraordinary entrepreneurial drive. The Global Entrepreneurship Index ranked Uganda among the world’s most entrepreneurial countries, with nearly 28 percent of the population engaged in business ownership. Across the country, young people are creating jobs through micro, small and medium-sized enterprises, often driven more by necessity than opportunity.

The challenge is not starting businesses. The challenge is helping them survive.

Far too many youth-led enterprises fail within their first two years, largely because they cannot access affordable and appropriate financing. For many promising entrepreneurs, the biggest obstacle is not the market. It is the financial system itself.

The stories behind these statistics are telling.

Speaking during the Young Africa Works Dialogue 2026, organised by the Mastercard Foundation in partnership with Heifer International Uganda in Jinja, Namukose Sylvia, Chairperson of the Kibaale Oilseed Cooperative, recounted being denied credit twice because she did not own land. It was only after joining a youth business group under the Stimulating Agribusiness Youth Employment (SAYE) project, implemented by Heifer International Uganda, where she received training in financial literacy, savings, record-keeping and market access, that she was able to grow her enterprise.

Similarly, Kirabo Jannie, a 22-year-old entrepreneur and Secretary of the Rubare Youth Dairy Cooperative in Ntungamo District, struggled to secure financing because her business documentation was incomplete. With support from her father, she eventually accessed UGX 1.5 million, enabling her to expand from a small grocery shop into dairy processing, producing yoghurt and ghee.

These are not stories of high-risk or irresponsible borrowers. They are stories of capable entrepreneurs constrained by systems that were never designed with them in mind.

The solution being proposed is not reckless lending. Rather, it is about redesigning the financial ecosystem so that it reflects how young people actually build businesses.

This begins with investing in financial capability and enterprise education, ensuring that young entrepreneurs possess the knowledge to manage finances, assess risk and grow sustainable businesses. It also requires greater use of digital finance and alternative data to develop credit profiles that extend beyond traditional collateral requirements.

Blended finance, credit guarantees and group-based lending models can help reduce perceived risks while expanding access to finance. Equally important is providing medium- and long-term patient capital that gives youth-led enterprises sufficient time to mature instead of expecting immediate returns.

Encouragingly, some financial institutions are already moving in this direction. A number of SACCOs and commercial banks have begun simplifying loan application processes, extending grace periods, designing products specifically for young entrepreneurs and including youth representatives in their governance structures. These interventions recognise that financial inclusion is not charity but a long-term investment in Uganda’s economic future.

This argument does not ignore the current economic realities. Uganda, like the rest of the world, is navigating rising inflationary pressures, higher energy costs, volatile exchange rates and global geopolitical uncertainty. Financial institutions must manage genuine risks while maintaining profitability.

However, difficult economic conditions cannot become a justification for excluding the country’s largest demographic from formal finance. If today’s young people cannot save, invest, borrow or grow businesses, tomorrow’s financial sector will have fewer depositors, fewer borrowers and fewer successful enterprises capable of driving economic growth.

Economically, Uganda stands at a crossroads. If the financial sector continues to rely on outdated lending models that unintentionally lock young people out of accessing productive resources such as capital, we risk undermining our own economic future. It is time to embrace innovation, redesign financial products and build an ecosystem that recognizes young people not as liabilities but as the next generation of wealth creators.

Bottom line: The question is no longer whether Uganda’s young people are financially viable. The real question is whether Uganda’s financial system is prepared to become viable for them. A financial system that cannot adapt to the realities of its youngest participants is a system preparing itself for obsolescence. The issue is not whether young people are bankable; it is whether our financial institutions are bold enough to become relevant to the generation that will shape Uganda’s future.