Banks urged to rethink lending as Uganda seeks forestry investment
Uganda’s forestry sector is seeking a shift in how banks and other financial institutions lend money to businesses, amid concerns that conventional financing models are not suited to the industry’s long investment cycles.
Tree growing and timber production often require years before investors can realise returns, making it difficult for smallholder farmers and businesses in the wood value chain to secure financing under conventional lending arrangements.
To address the challenge, the Uganda Institute of Banking and Financial Services (UIBFS) has partnered with the Food and Agriculture Organisation of the United Nations (FAO) to equip financial institutions with the skills to assess and finance forestry-related investments.
The two organisations recently convened stakeholders from government, financial institutions, development partners, the private sector and academia to validate a market and institutional assessment report and a specialised curriculum on sustainable forestry and wood value chain financing.
The curriculum was developed by UIBFS at the request of FAO, with funding from the European Union.
The assessment examined the readiness of financial institutions to finance the forestry and wood industry, identifying investment opportunities, institutional capacity gaps, sector-specific risks and existing financing constraints.
Based on the findings, UIBFS developed a training programme intended to help financial sector professionals identify viable investment opportunities, assess risks and design financing products suited to businesses across the value chain.
The curriculum will be piloted before being rolled out to professionals in financial institutions, in a move expected to encourage banks and other lenders to increase financing to sustainable forestry and wood-based enterprises.
Speaking at the workshop, UIBFS chief executive officer Goretti Masadde said Uganda’s forestry sector had significant economic potential but continued to face a financing gap that needed to be addressed.
She said appropriate financing could help smallholder tree farmers move from subsistence production to commercially viable enterprises while enabling small and medium-sized businesses to expand their operations.
“Uganda’s forestry and wood sector represents more than an environmental opportunity. It is a powerful driver of sustainable investment, enterprise growth, job creation and economic transformation,” Masadde said.
She added: “The opportunity before us is much bigger than financing trees or timber. It is about financing an entire value chain and unlocking economic value.”
Masadde said specialised financial expertise and innovative financing solutions could strengthen smallholder farmers, modernise wood-processing enterprises, expand market opportunities and improve Uganda’s export competitiveness.
She said the training programme should translate into practical financial sector competencies and investment solutions that support sustainable livelihoods, import substitution and Uganda’s ambition of achieving a $500 billion economy by 2040.
Leonidas Hitimana, FAO Uganda’s sector head of forestry, climate and environment, said the country needed to move away from traditional funding approaches towards sustainable, long-term financing for forestry investments.
He commended UIBFS for developing the specialised curriculum but said its success would depend on continuous training, practical application and sustained engagement with financial institutions.
Hitimana also acknowledged the support of the European Union, Denmark and the government of Uganda in promoting sustainable forestry development and strengthening the country’s wood value chain.
Rohan Tejpar, a programme officer at the European Union Delegation to Uganda, said access to finance remained one of the major obstacles to the growth of the country’s forestry and wood industry.
He called for innovative financing solutions that take into account the sector’s unique investment requirements, particularly the long periods between planting trees and generating returns.
Tejpar said the European Union’s forestry programme, co-financed with Denmark, supports reforestation, forest governance, conservation and the development of wood and non-wood forest value chains.
