Technology Adoption

Key Highlights

This low score in access to and use of business-related technology suggests that Ugandan MSMEs are lagging in terms of embracing and leveraging technology in their businesses. Key informants and business owners viewed smartphones as essential communication and transaction tools that streamline business operations and provide access to market information, enhancing MSMEs’ efficiency through online orders, payments and advertising, market explanation through rural areas face access barriers.

The study findings indicate that the primary factor contributing to the Technology Entrepreneurship Index across MSMEs is access to technology, particularly smartphones and computers. The findings show that the level of technology adoption and usage among the surveyed MSMEs is relatively low, mainly due to the limited access to these essential tools for modern business operations and digital entrepreneurship. A significant digital divide is evident, with more than half of the businesses (53.4%) lacking access to either a smartphone or a computer. Furthermore, only 9.8% of the businesses have access to both a smartphone and a computer, which is crucial for leveraging the full potential of digital technologies.

Although 35.5% of the businesses have access to a smartphone, this figure remains relatively low compared to the global average, through slightly higher than the national average standing at around 22 30%; this low access hinders ability to access digital services, communicate with customers, and perform basic business functions on the go. The low adoption of software tools, such as accounting software, further limits MSMEs’ potential to enhance efficiency, accuracy, and transparency in their operations. Consequently, nearly two-thirds of the businesses (64.9%) report not having access to the necessary technology for their operations, which can impede their ability to innovate, compete, and grow in an increasingly digital economy.

Factors Driving the Technology Entrepreneurship Index

Across sectors, technology adoption and utilization vary significantly across sectors. The Information and Communication sector has the highest access to mobile phones or computers (93.3% with smartphone or computer access), software usage for operations (66.7%), and access to necessary technology (53.3%). On the other hand, the Agriculture, Forestry, and Fishing sectors have the lowest levels of access and utilization across all three categories. This indicates that technology adoption and utilization are influenced by the nature and requirements of the sector

Therefore, it is evident that access to technology, particularly smartphones and computers, is the primary factor driving the Technology Entrepreneurship Index among MSMEs. The findings reveal a significant digital divide, with more than half of the businesses lacking access to these essential tools, hindering their ability to fully leverage digital technologies for modern business operations and entrepreneurship. The study highlights the disparities in technology adoption and utilization across different groups.

Younger age groups, male-owned businesses, and those with higher levels of education are more likely to have access to and utilize technology in their businesses. In contrast, businesses owned by individuals with disabilities and smaller enterprises with fewer employees face greater challenges in adopting and utilizing technology. Furthermore, the sector-specific analysis reveals that technology adoption and utilization vary significantly based on the nature and requirements of the industry. The Information and Communication sector stands out with the highest levels of access and utilization, while the Agriculture, Forestry, and Fishing sector lag behind in all three categories.

Hence, the study underscores the urgent need to bridge the digital divide among MSMEs by focusing on improving access to smartphones, computers, and other necessary technologies. Policymakers and stakeholders can prioritize initiatives that target underserved groups, such as businesses owned by individuals with disabilities and smaller enterprises, to ensure inclusive growth and equal opportunities in the digital economy. Moreover, sector-specific interventions and support mechanisms need to be designed to address the unique challenges and requirements of each industry, fostering innovation, competitiveness, and resilience in an increasingly technology-driven business landscape.

Data from key informants revealed that MSME owners predominantly smartphones are essential tools for communication with customers, suppliers, and for conducting financial transactions using mobile money. Technology, particularly smartphones, is widely regarded as a means to streamline business operations and enhance efficiency. This includes managing inventory, communicating effectively with customers, and handling financial transactions remotely. Moreover, MSME owners utilize smartphones to access crucial market information, allowing them to stay updated on trends and new products. This access empowers them to make informed decisions that positively impact their businesses. Additionally, mobile money services are highlighted as a significant technological advancement that simplifies financial transactions, reduces the reliance on physical cash handling, and enhances overall financial management practices.

Additionally, gender and location influence the understanding of technology. Females frequently highlight the use of phones for business operations and communication, whereas males often emphasize tools and machines to enhance production and efficiency. Urban MSMEs prioritize mobile money and online transactions, leveraging these technologies for financial management and sales. In contrast, rural MSMEs rely heavily on phones for communication and accessing market information, reflecting their need for connectivity and market awareness in less digitally saturated environments.