Uganda Entrepreneurial Ecosystem Initiative Report

The Uganda Entrepreneurial Ecosystem Initiative was conducted by Enterprise Uganda, Koltai &Company and Center for Development Alternatives (CDA), while being facilitated by the Aspen Network of Development Entrepreneurs (ANDE) – Funfact: Our CEO Johnni Kjelsgaaard is the Chairman of the ANDE East Africa Steering Committee. This Initiative was funded by the Argidius Foundation, the Dutch Good Growth Fund, and the Small Foundation, and with support from the Shell Foundation, Swiss Development Corporation, and the United States Agency for International Development (USAID), ANDE is excited to launch this Initiative.

Our Growth Catalyst in Uganda, Michelle Mboha, attended the official presentation of initial findings from Phase I event in Uganda, alongside key ecosystem players. She shared the highlights below as per the findings.

Michelle Mboha – Growth Catalyst, Uganda

The methodology used to conduct the study can be summarised as follows:

Reviewed 70+ sources
A firm perspective survey administered to 111 SGBs in Kampala and 57 in Gulu
Key Stakeholder Interviews and Focus Group Discussions with 53 ecosystem actors (including entrepreneurs) in Kampala and 20 in Gulu

Key findings
The major binding constraint to Small and Growing Businesses (SGBs) are:

1. Moderate growth since SGB finance perceived as too risky. This perception is as a result of the following:

Informal practices within businesses, poor business models and weak management skills
Lack of collateral on the side of business
High cost of obtaining information due to a lack of records and weak Credit Reference Bureau

Outcome: Most SGBs raising in the USD 100,000 range are under-served.

2. Investment in early stage business is not commercially viable which is a result of the following:

Lack of records, weak management skills, lack of appetite for equity, pre and post business development services are too costly
Most SGBs do not fit “impact” definitions. Impact is narrowly defined as mostly focusing on companies providing BoP products and services

Outcome: Most SGBs remain under-served

3. Vicious cycle with regards to financial records, informality and tax because of:

Fear of heavy tax burden and exposure
Lack of trust in the government
Limited awareness and skill set with regards to maintaining financial records

Outcome: Assessing credit worthiness to become difficult. Entrepreneurs grow sideways not upwards

4. Culture of informality due to:

Family business mentality
Mixing personal and business finances
Celebrating the wrong entrepreneurs, i.e those who took short cuts to get rich

Outcome: Non-documentation, weak systems and governance. Lack of confidence to grow upwards builds up

5. Weak management skills due to:

Courses are theoretical in university
Lack of patient strong and affordable BDS

Action Pathways

1. Increase SGBs ability and incentives to become tax compliant and maintain financial records

Tax compliance / management training for SGBs
Record keeping training
Improved tax perception; media engagement, awards etc
Strengthen evidence-based discourse on SME tax regime

2. Catalyse more appropriate finance for SGBs, which is USD 20.000 – 100,000

Strengthen the CRB
Pilot/ scale tailored financial instruments e.g leasing, asset finance, contract finance etc.
Set up/ scale up non-distortionary loan guarantee facilities

3. Catalyse more patient and affordable BDS

Set up consolidated BDS provider
Establish one stop shops for BDS provision
Facilitate market entry of new/ early stage accelerators/ incubators/ BDS providers
Set up a scale up BDS subsidy grant fund(s)

4. Catalyse more practical entrepreneurship and management training