The 2025/26 budget speech by Finance Minister Matia Kasaija on June 13, 2025, puts start-ups and Small and Medium Enterprises (SMEs) squarely at the heart of Uganda’s economic transformation.
Against a backdrop of strong macroeconomic fundamentals, stable GDP growth, low inflation at 3.4%, and a now USD 61 billion economy yielding USD 174 billion in Purchasing Power Parity, the budget sets up both incentives and structural support for entrepreneurial growth.
With Uganda graduating from Least Developed Country status and joining the lower-middle-income club, the stakes are high for startups and SMEs to drive innovation, create jobs, and deepen domestic value creation.
Tax Incentives and Financial Relief
A major boost comes through start-up tax exemptions: Ugandan citizen-owned startups registered after July 1, 2025, will enjoy a three-year income tax holiday.
This is a critical lifeline for early-stage ventures struggling with cash flow, allowing them to reinvest earnings into growth rather than tax liabilities.
Additionally, a transformative capital gains tax exemption enables asset transfers to fully‑owned companies without capital gains tax for entrepreneurs fulfilling business formalization.
Both measures aim to lower entry costs, foster formalization, and improve access to finance.
Complementing these tax breaks, the budget reiterates rationalization of exemptions, enhanced URA compliance tools, and introduction of new tax‑administration measures expected to generate UGX 538.6 billion.
While aimed broadly at improving revenue mobilization, the reform suite also offers a predictable and transparent tax regime that is essential for SME planning and investment forecasting.
Access to Affordable Credit and Supportive Financial Instruments
Targeted credit mechanisms figure prominently in the FY2025/26 budget. Through the Uganda Development Bank (UDB), the government provides affordable capital to startups and SME manufacturers, bolstered by UGX 1 trillion in additional capitalization.
The Agricultural Credit Facility and Women’s Enterprise Fund rollouts a combined UGX 231.3 billion ease access to capital for rural and women-led startups, while targeted interest‑free commercial-farmer loans totalling UGX 175 billion hint at future expansion to non-agricultural SMEs.
The budget allocates microfinance support of UGX 648.5 billion, reflecting recognition that SMEs often rely on microloans for essential working capital.
Further support comes through the rejuvenated Small Business Recovery Fund (SBRF), which has already preserved over 26,000 jobs across nearly 3,500 micro and small enterprises.
In 2025/26, the budget sets aside additional resources to expand this cushion, ensuring that emerging ventures remain resilient as the economy stabilizes post-COVID‑19.
Enhanced Infrastructure and Ecosystem Enablers
Startups and SMEs stand to benefit indirectly from the government’s comprehensive infrastructure agenda.
Completion of five industrial parks in Bweyogerere, Mbale, Kapeeka, Kasese, and Soroti, the upgrade of regional airports and trunk roads, and the ongoing development of the Standard Gauge Railway mark a new era in connectivity and access.
These physical enablers reduce logistics costs, improve supply chain reliability, and support regional expansion which is vital for startups and small-scale manufacturers aiming to scale beyond Kampala.
On the digital front, investments in National Backbone Infrastructure extension, Smart City pilots, and consolidation of e-government platforms (UGHub, payment aggregators) will dramatically improve service delivery.
For tech‑driven startups, cloud‑based innovators, and fintech ventures, faster internet, mobile money integration, and reduced bureaucratic friction could unlock new business models and market outreach.
Capacity Building and Innovation Support
The budget holds promise for human capital development and innovation ecosystems. By allocating resources to TVET expansion, startup incubation hubs, and ICT skilling under the Digital Uganda Vision, the government aims to nurture a proficient workforce capable of deploying emerging technologies in startups.
Further support to Research & Innovation centers like the National Science and Technology Council signals a move towards evidence-based product development and commercialization, an essential footing for deep-tech and agritech startups.
Moreover, increased funding for youth empowerment programs like Emyooga (UGX 100 billion additional) and the Parish Development Model (UGX 1.059 trillion) includes training components, notably for equipment operation and financial literacy.
The budget deliberately foregrounds youth and women entrepreneurs as future economic anchors, aligning training with capital, market access, and formalization pathways.
Export Opportunities and Market Diversification
A key objective is to spur the development of exportable value-added products and scale SMEs into regional markets. Government support for agro-processing facilities, including aflatoxin-safe processing in Nambale, will help farm-based agripreneurs access higher-income global markets.
Export diversification efforts under Vision 2040, including new products like pharmaceuticals and ICT hardware, open export market niches for SMEs beyond primary commodities.
Financing through UDB and Uganda Development Corporation is expected to help enterprises invest in certification, packaging, and export-grade operations. For startups eyeing markets in East Africa and beyond, this creates a strategic springboard.
Regulatory Landscape and Governance Risks
Despite these positive moves, several challenges could limit the budget’s impact on startups and SMEs.
First, regulatory compliance remains a sticking point. While URA digitization and reforms are underway, bureaucratic processes tied to company registration, licensing, and tax filings could continue to stifle the ease of doing business unless aggressively streamlined.
Additionally, debt sustainability poses a fiscal risk. With debt servicing at UGX 4.98 trillion and a significant security allocation (UGX 9.9 trillion), future revenue may be squeezed.
This could reduce the fiscal headroom available for SME incentives or force cost-cutting that affects critical support programs.
Another point is uneven rollout of digital infrastructure means startups in rural districts may still struggle with connectivity or access to e-services.
The success of Smart Cities will need to be matched by private-sector uptake and regional capacity strengthening.
Lastly, despite robust financial allocations, the SME-finance gap remains. Credit interest rates hover around 17-18%, and collateral requirements still shut out many small entrepreneurs.
The flow-through from credit programs to SMEs needs acceleration, accompanied by risk-sharing mechanisms and credit guarantee schemes to scale uptake.
Path to Sustainable Ecosystem Growth
The budget is a strong signal of the government’s intent to make startups and SMEs integral to national development.
However, to translate paper commitments into on-the-ground opportunities, Uganda must invest in supportive institutions.
Kenya’s experience with agile startup regulation, diaspora angel networks, and export aggregation provides useful benchmarks.
Emulating best practices such as centralized business-registration portals, dedicated SME tax desks, and digital land registries could reduce administrative friction.
Moreover, leveraging the newly drafted East African Political Federation vision could eventually harmonize regulations and tariffs across the region, smoothing market expansion paths for SMEs.
A Budget of Promise with Critical Follow-Up
Uganda’s 2025/26 budget represents a watershed moment for its startup ecosystem and SME sector.
Through a well‑rounded package of tax breaks, credit support, infrastructure investment, and capacity-building initiatives, the government has laid the foundation for a more enabling environment.
However, these measures will deliver impact only with consistent implementation, transparency, and acceleration of digital and financial ecosystems outside Kampala.
To truly “monetize” the Ugandan economy, the public and private sectors must collaborate in making legal, fiscal, and digital systems SME-friendly across districts.