A farmer in Omoro district spraying a vegetable garden using a solar irrigation system. Photos by Arnest Tumwesige
By Komakech Jimmy
Gulu: In an effort to ensure Uganda attains its goal of delivering affordable and environmentally friendly trade by promoting energy efficiency at community level, the banking sector has embarked on a grant initiative aimed at supporting Small and Medium Enterprises (SMEs) across the country.
The initiative will provide partial grant funding to help SMEs adopt renewable energy and energy-efficient technologies, enabling them to expand and improve their businesses over a four-month period.
Christine Birungi, the Director in charge of Business Development, Marketing and Membership at the Uganda Institute of Banking and Financial Services, revealed that the partial grant will support SMEs investing in renewable energy and energy-efficient technologies.
The stakeholders in the program include suppliers who will provide SMEs with renewable energy and energy-efficient technologies.
According to Birungi, the grant will benefit about 35 SMEs across the country.
“We already know the challenges that SMEs have, especially those dealing in renewable energy businesses. They face challenges where banks do not have suitable products. When they go to the banks, the resources are changed,” she explained.
Tackling the access to income gap
She added that when an entrepreneur seeks financing to purchase a machine, the request is often converted into a general business loan. Yet many SMEs lack the capital required to acquire renewable energy-efficient machines they need for their operations.
Birungi said the grant was designed to bridge that gap and help mitigate the financial barriers faced by SMEs seeking to invest in efficient energy technologies.
She explained that the grant will be issued under a 50-50 arrangement, where an SME receives 50 percent as a non-refundable grant from the Uganda Institute of Banking and Financial Services, while the remaining 50 percent can be accessed through financing from participating banks.
Applications are currently being submitted through an online platform, with a deadline of 30 June 2026.
Birungi noted that the bank financing component will depend on the duration determined by the lending institutions.
“For the 50 percent coming from the banks, the banks will have their own duration depending on the financing terms. However, accessing the bank portion will not stop an SME from benefiting from the 50 percent grant,” she said.
Denis Rukundo from GIZ acknowledged that financing constraints remain a major barrier for SMEs seeking to invest in energy-efficient technologies.
He explained that grants such as this are intended to support SMEs in managing the high upfront costs associated with such investments.
Rukundo said the grant also serves as a de-risking mechanism for SMEs because it reduces the initial investment burden.
“When the upfront cost is reduced, the payback period becomes shorter. This reflects positively on the SMEs’ balance sheets, particularly in terms of the non-value ratio and their debt service coverage ratios,” he noted.
He added that this improvement makes SMEs more attractive to financial institutions for further financing.
Rukundo further revealed that the project is being implemented collaboratively with political and development partners to support market development. Financial institutions will work closely with SMEs to verify projected energy savings and determine the most appropriate financing structures.
The grant is also expected to unlock additional financing from financial institutions, which often struggle to identify credit-worthy SME investment pipelines.
Through the project, SMEs will also receive technical assistance, including energy audits to verify projected savings, expected returns, and projected cash flows.
The verified savings and technical assistance will serve as a de-risking tool to give financial institutions confidence to finance these technologies, ultimately helping businesses reduce their energy costs.
Rukundo emphasized that energy efficiency is key to the long-term sustainability of SMEs because energy costs constitute a significant operational expense.
“Energy efficiency lowers the cost of energy by reducing consumption. The savings can then be reinvested into the business, whether in improving raw materials, acquiring new machinery, improving livelihoods, or expanding operations,” he said.
Bugembe John Mark from the Ministry of Energy and Mineral Development explained that SMEs must first establish their energy savings potential before designing a bankable energy-efficiency project.
“With a detailed energy audit, banks are able to see evidence of the investment and understand how the savings will translate into cash flows that will help SMEs repay the loans they take,” he said.
He added that under the partial grant arrangement, 50 percent of the funding will come from the Green Fund, while the remaining 50 percent will be accessed through commercial banks, with SMEs choosing the banks they prefer to work with.
High cost of value addition machines
Florence Adong from Matching Needs Enterprises, a business that produces peanut butter in Gulu, said SMEs often procure machines that consume large amounts of electricity, which increases operational costs.
“In most cases we buy machines that use a lot of power, and we spend a lot of money every month on electricity,” she said.
Adong believes that access to such grants would significantly reduce their production costs and, ultimately, the cost of goods.
She noted that acquiring energy-efficient technologies remains difficult for many SMEs due to the high purchase costs.
According to Adong, the business spends between 500,000 and one million shillings per month on electricity, translating to about 12 to 13 million shillings annually.
She said support through such grants would help businesses operate more smoothly.
Adong also expressed concern that the high cost of running machines on electricity can severely hinder small businesses.
She added that SMEs sometimes face challenges with service providers who do not fully understand the constraints faced by small enterprises.
The total grant fund amounts to 500 million shillings, targeting about 30 beneficiaries with different ticket sizes depending on the scale of the SME.
The first investment bracket begins at 3 million shillings, covering SMEs investing between 3 million and 10 million shillings.
