In his foreword to the inaugural State of Entrepreneurship in Uganda 2024 report, Francis Mwebesa, the Minister of Trade, Industry and Cooperatives said, ‘Micro small and medium enterprises (MSMEs) are the lifeblood of Uganda’s economy, accounting for over 90% of private sector firms and employing millions of citizens’.
He said, ‘This report shines a light on the tremendous entrepreneurial spirit of Ugandans and the resilience of our MSMEs, while also identifying critical gaps and barriers constraining their growth and success’.
The report, which was officially launched this week, provides a comprehensive assessment of the MSME ecosystem in the country. It was compiled in partnership between the Ministry, Mastercard Foundation, IPSOS, and the Ichuli Institute. The findings are based on a nationally representative survey of 3,062 MSMEs and in-depth interviews with 300 owners.
Mwebesa said, ‘The National Entrepreneurship Index, developed through this study, reveals that Uganda has a moderately healthy entrepreneurial ecosystem with an overall score of 57%. Our entrepreneurs demonstrate highly positive attitudes, a strong willingness to grow their businesses, and perceptions of adequate human capital.
He said, ‘However, the index also highlights areas for urgent action and support, particularly in simplifying business registration, improving access to finance and technology, and strengthening market linkages’.
Speaking at the launch in Kampala, Dr. Margaret Kemigisa, the Director of IPSOS Africa Centre for Development Research and Evaluation, said an index score of 57%, reflects a moderately healthy ecosystem despite the significant barriers that threaten its growth and sustainability.
“The index encompasses eight critical components: human capital, formality, linkages, technology, internal processes and systems, attitudes, willingness to grow, and financial sustainability. These components collectively shape the environment in which MSMEs operate and influence their growth potential,” she said.
Ownership of the MSMEs sampled was almost evenly distributed by gender, 50.3% female and 49.7% male. Retail trade, accommodation and food services, and agriculture were the top three sectors. However, emerging sectors like ICT, health, and education demonstrated strong entrepreneurial health based on their scores.
The data also revealed that three of the sub-component dimensions significantly outperformed the overall Index, namely, ‘positive attitudes’ of entrepreneurs (88%), ‘strong willingness to grow their businesses’ (79%), and perceptions of adequate ‘human capital’ (78%).
Underperformance was recorded for ‘business linkages’ (24%), ‘adoption of business technologies’ (35%), registration (39%), and access to finance (52%).
Young women entrepreneurs aged 18-30 scored slightly lower at 56% compared to 59% for their male counterparts. When looking at women-owned MSMEs in general, the index score stands at 56% compared to 59% for men, mirroring the trend among youth. Younger entrepreneurs aged 18-24 posted the highest overall index score at 60%.
Over half of MSMEs were micro enterprises operating as sole proprietorships with no employees beyond the owner. Thirty-five per cent of the entrepreneurs aged 18-30 years, had zero employees. These comprise 26% of the male entrepreneurs and 42% of the female entrepreneurs. Only 2% of youth owned MSMEs had 10 or more employees.
Technology adoption remained low, with 53% of MSMEs having no access to a smartphone or computer for their business. This digital divide was wider for women, rural MSMEs and those with disabilities.
While entrepreneurs expressed optimism about prospects to grow their businesses, unstable and declining cash flows were a reality for nearly half of MSMEs surveyed. Access to finance and keeping business records were key challenges.
The study found that the operational aspects of running MSMEs constrained the overall index, specifically in terms of limited access to finance (index score of 52%), high degree of informality with low business registration (39%), and weak business linkages (24%).
Amongst the recommendations for improvement, policymakers need focus on simplifying business registration processes, improving access to credit and financial services, and facilitating market linkages to create a more supportive ecosystem for MSME growth and formalization.
In line with this, there is also a need for policymakers and national business registration authorities to work together to improve registration services for MSMEs by strengthening the role and capacity of decentralized government offices at the district, county, and sub-county levels in providing accessible and efficient business registration and operational support to MSME entrepreneurs and business owners.
Other key recommendations include streamlining and simplifying the registration process; addressing corruption and increasing transparency; improving accessibility in rural areas; providing registration support and information; addressing gender-based challenges; and offering post-registration support.
Government agencies, private sector partners, and development organizations may need to invest more in digital infrastructure, such as broadband networks and mobile connectivity, especially in underserved areas.
They can also collaborate to provide affordable access to digital devices, such as smartphones and laptops, through subsidies or financing schemes; partner with training institutions and technology providers to offer digital literacy and skills training programs tailored to the needs of MSMEs.
While the study finds that entrepreneurs have positive attitudes (index score of 88%) and a strong willingness to grow their businesses (79%), it also highlights gaps in key business management skills such as financial planning, record-keeping, and adopting standard business processes.
Policymakers and development partners should consider designing and implementing comprehensive entrepreneurship training and mentorship programs that cover both technical and soft skills, with a focus on practical application and peer to peer learning and networking.
Although Ugandan entrepreneurs demonstrate strong drive and potential, concerted efforts are required to address constraints related to business formalization, access to resources and markets, technology adoption and development of robust business processes. Supporting underserved groups like women, youth, rural and Persons with Disabilities (PWDs) entrepreneurs needs to be prioritized.
Evidence shows that sector-specific interventions can harness emerging opportunities while boosting productivity in established MSME sectors. Inclusive policies and an enabling environment are critical to unlock the full promise of entrepreneurship as an engine for Uganda’s economic transformation.
