Bank lending in Uganda grew at its fastest annual rate since October 2015 in August, led by foreign-currency loans ahead of the shilling’s latest slide.

Outstanding commercial-bank lending reached Shs27tn, up 17.6 per cent from a year earlier, according to Bank of Uganda data. The annual growth rate was 6.8 per cent in August 2025.

The central bank’s broader measure of private-sector credit, which includes credit institutions, deposit-taking microfinance lenders and savings co-operatives, rose 19.5 per cent. That was more than three times the 5.5 per cent growth in net credit to the government.

Foreign-currency loans grew 37.5 per cent, against 9.6 per cent for shilling loans, and supplied 61 per cent of the increase. They accounted for a third of commercial banks’ outstanding lending.

Some of that growth reflects the weaker shilling, which raises the local-currency value of foreign-currency loans. A Uganda Business News estimate using the August 2025 end-month dollar rate puts growth at about 29 per cent for foreign-currency loans and 15 per cent overall. Foreign-currency loans still supplied just over half the adjusted increase. The estimate uses the dollar rate as a proxy because the lending data do not distinguish between foreign currencies.

Manufacturing, trade, and mining and quarrying accounted for 57 per cent of the increase in foreign-currency balances. Manufacturing contributed Shs550bn, trade Shs462bn, and mining and quarrying Shs387bn.

Banks charged a weighted average 7.5 per cent on foreign-currency loans in August, against 17.9 per cent on shilling loans. The gap was 10.4 percentage points, little changed from 10.1 points a year earlier.

The shilling’s fall past Shs4,000 to the dollar on 5 October raises the cost of servicing dollar loans from shilling income. The data do not show how much lending is covered by borrowers’ foreign-currency earnings or hedging arrangements. Non-performing loans were 2.6 per cent of commercial banks’ gross loans in June, the lowest since December 2011, and 1.3 per cent for foreign-currency loans. Both measures predate the latest currency decline.

Households accounted for the largest sectoral share of the increase, at 29 per cent, and nearly all of that was in shilling loans. Within it, loans for non-durable goods and services supplied almost all of the rise, while durable goods lending was little changed. Lending to manufacturing and business services grew by more than a fifth.

Mortgage balances fell slightly, and banks reported net tightening of standards for building, mortgages, construction and real estate in all 13 quarters shown in the central bank’s lending survey.

Commercial banks’ liabilities to non-residents rose from Shs3tn to Shs5.6tn in the year to August, while their net foreign assets swung from a Shs1.5tn surplus to a Shs0.9tn deficit. Domestic foreign-currency deposits rose by Shs2.4tn, roughly matching the increase in foreign-currency loans, and banks’ claims on the central bank also increased. The aggregate figures do not establish how banks used the additional foreign funding.

In the central bank’s September lending survey, 10.4 per cent of banks, weighted by market share, expect to raise lending rates in the quarter to December, against 86.2 per cent expecting no change. Banks expecting an increase cited rising funding costs, which the report attributed to “persistent liquidity pressures, particularly the scarcity of USD funding and the high cost of mobilizing local currency deposits”.

The central bank raised commercial banks’ cash reserve requirement to 13.5 per cent from 11 per cent, effective 24 September, after the August lending figures. The change requires banks to hold a larger share of deposits at the central bank.

Banks expected business demand for credit to increase in the quarter to December. A separate central bank survey of 91 firms in and around Kampala found that 8.8 per cent had applied for a loan in the quarter to September, down from 17.6 per cent in the previous quarter, and that 4.4 per cent planned to apply in the quarter to December. Those shares equal eight firms and four firms. The central bank noted the divergence between the surveys, which measure banks’ assessments of demand and the share of sampled firms applying for loans.