A growing number of Ugandan traders are steering clear of formal banks, citing high costs, strict requirements, and limited trust in financial institutions. For many, operating in cash feels more practical and accessible than navigating the hurdles of the formal financial system.
Experts point to several factors keeping traders away from banks. High transaction fees and inflexible charges discourage small-scale business owners, many of whom feel that banking costs eat into their already thin profit margins. The lack of transparency around fees further reinforces the perception that banks are not designed to support informal market traders.
Trust issues add another layer of hesitation. Traders often struggle with strict documentation needs, collateral demands, and complex onboarding procedures. Others believe the banking sector caters more to large corporate clients than small business owners. As a result, many prefer relying on cash or informal financial solutions to run their businesses.
Although efforts to expand financial inclusion such as mobile money and non-bank financial institutions are gaining traction, challenges remain. Some policies meant to protect consumers, like interest rate controls, have unintentionally reduced lender participation, limiting traders’ access to affordable formal credit.
For real progress, financial institutions must better understand the realities of everyday traders. Products tailored to small businesses, reduced fees, simpler onboarding, and strengthened trust-building efforts could help bridge the gap. Only by adapting to the needs of traders can banks play a larger role in driving inclusion and sustainable economic growth across Uganda.