Financial Sustainability
Evaluates the financial health and cash flow stability of businesses. This dimension reflects how well businesses manage their finances and access funding for growth.
Key Highlights
This score demonstrates that access to finance and financial management practices among MSMEs in Uganda are at best moderate. Study participants viewed financial management ss crucial for sustainability through improved savings, planning, record-keeping and access to loans. MSMEs prefer informal financing like savings groups. High collateral and interest rates limit access from formal f inancial institutions. Business constraints, growth needs, emergencies and seasonality drive MSMEs to seek external finance. Crucially, MSMEs contribute to society through environmental conservation, providing essential local goods/services, and creating employment opportunities in their communities.
The process of getting a loan from banks is hard. The banks ask for security which has a higher value than the money you are going to borrow, and on top of that, the interest that banks ask [for] are high
Male, adult, Real Estate business, Wakiso District
Financial Sustainability
The results from this survey support other similar surveys among Ugandan MSMEs and underscore the need for support and interventions to improve the financial literacy, access to credit, and overall financial stability of the entrepreneurial ecosystem . The GEM 2014 and GEM survey 2023 found challenges of f inancial access among small business in Uganda.
There were very high levels of self-reported profitability among Ugandan MSMEs, with some variations by age, gender and PWD status. profitability of business was reported fairer. Overall, 77.4% of entrepreneurs reported making a profit last year, indicating a fairly high level of profitability. Only 14.2% reported not making a profit, while 8.4% were unsure
Capital Investment
Younger entrepreneurs had lower capital investments, while older entrepreneurs are more likely to invest larger amounts. The most common investment range is 1,000,001 - 5,000,000 UGX across all age groups. Significant differences exist in specific financial investment categories, highlighting the varying investment patterns among different age groups. These insights can help policymakers and support organizations tailor their interventions and resources to address the specific needs of entrepreneurs in different age brackets.
Capital Investment in Business by Age of Business Owner
The “Less than 100,000 UGX” category has significantly higher percentages for the “18-24” (7.1%) and “41-50” (9.6%) age groups compared to the “51-60” (4.3%) and “61+” (3.2%) age groups. This suggests that younger entrepreneurs tend to start with lower capital investments.
The “More than 10,000,000 UGX” category shows significantly higher percentages for the “31-40” (14.4%), “51-60” (8.3%), and “61+” (15.1%) age groups compared to the “25-30” (11.2%) and “41-50” (7.8%) age groups. This indicates that older entrepreneurs are more likely to invest larger amounts of capital in their businesses
Across all age groups, the highest percentage of capital investment falls in the “1,000,001 - 5,000,000 UGX” category, ranging from 31.6% to 40.8%. This suggests that this investment range is the most common among entrepreneurs in Uganda.
The “100,000 - 500,000 UGX” category shows significant differences, with higher percentages for the “31-40” (19.3%), “41-50” (21.0%), and “51-60” (24.0%) age groups compared to the “18-24” (14.6%) and “61+” (11.1%) age groups. This indicates that entrepreneurs in the middle age ranges are more likely to invest low amounts in their businesses. Similar Patterns in the 500,001 - 1,000,000 UGX and 5,000,001 - 10,000,000 UGX investment ranges
Profit, stability, business impact, sustainable practices and financial records
Most businesses across all age groups and genders reported profit margins in the range of 0-10% (42-47%), Table 17. However, a significant portion (20-24%) also reported profit margins above 20%, indicating strong financial performance. The 61+ age group and those with disabilities had a slightly higher percentage of businesses with profit margins above 20%, suggesting resilience and adaptability.
Cashflow stability varied across the board, with 28-37% of businesses reporting increasing cashflow, 16-23% reporting stable cashflow, 37-44% reporting unstable cashflow, and 6-9% reporting declining cashflow (Table 17). The 51-60 age group and those with disabilities face more challenges, with higher percentages reporting unstable cashflow (44% and 48%, respectively). This highlights the need for targeted support and interventions to improve cashflow management.
Graphs give findings on reported business impact and sustainability respectively. A high percentage of businesses (84-92%) report having an impact beyond generating income, with creating jobs (46-57%), providing better customer care (57-65%), and paying taxes (31-48%) being the most common forms of impact. However, the adoption of sustainable practices remains relatively low (40-51%), with waste management being the most prevalent (54-66%). There is an opportunity to promote and incentivize sustainable business practices across all age groups and genders.
Cash records (64-75%) and handwritten ledgers (23-28%) are the most common methods of financial record-keeping, with limited adoption of computerized systems and professional accounting services (0-5%). This suggests a need for capacity building and access to modern financial management tools to improve efficiency and decision-making.
While businesses in Uganda demonstrate resilience and impact, there are opportunities to enhance financial performance, cashflow stability, sustainability, and financial management practices. There is need to explore tailored support, training, and resources should be provided to entrepreneurs across all age groups and genders to foster a more robust and inclusive entrepreneurial ecosystem.
Budgeting
Overall, 61.8% of entrepreneurs reported not preparing financial budgets at all. This suggests a low adoption of formal financial planning and budgeting. Annual budgeting is the most common frequency at 25.3% overall, followed by no budgeting. Monthly, quarterly, and semi-annual budgets are less common (under 6% each).
Younger entrepreneurs aged 18-24 are more likely to prepare annual budgets (34.8%) compared to other age groups. The proportion doing annual budgets declines with age. The 31-40 and 41-50 age groups have the highest rates of not budgeting at all (64.7% and 66.3% respectively). Budgeting adoption seems lowest among these mid-career ages.
Budgeting is less common among those with disabilities. Entrepreneurs with disabilities have a noticeably higher rate of not preparing budgets (72.6%) compared to those with no PWD (62.4%). There is relatively low adoption of financial budgeting overall, with differences by age, gender and PWD status. Younger and non-PWD entrepreneurs are somewhat more likely to budget. Increasing budgeting practices could be an area of focus to improve financial management among Ugandan entrepreneurs.
Males and females have fairly similar budgeting practices overall, with a slightly higher proportion of females not budgeting at all (63.5% vs 60.1% for males).
