If you have ever taken out a loan in Uganda, you might have noticed something puzzling. Maybe you asked a friend what rate they were paying, only to find out it was lower or higher than yours, even though you borrowed from the same bank or at the same time. It can feel unfair at first glance, but there are solid reasons why interest rates are not the same for all borrowers.
Understanding those reasons can help you make better financial choices, prepare yourself for better borrowing terms in the future, and appreciate the role of institutions like Fido that are making access to credit more inclusive.
A good place to start is with the central bank. The Bank of Uganda sets what is called the Central Bank Rate (CBR), which influences the general cost of borrowing money in the economy (Bank of Uganda). When the CBR goes up, borrowing across the country tends to get more expensive. When it goes down, lenders are encouraged to lower their rates, too.
But the CBR is just the foundation. Banks, microfinance institutions, and fintechs then add their own calculations on top. They consider the risk of lending to a particular person, the type of loan, how much collateral is pledged, and even their own cost of doing business. That is why the final interest rate one person pays can be very different from another’s.
Interest rates are never “one size fits all.” Lenders look at many factors when setting them, and here are some of the most important ones.
Credit history matters. If you have a record of repaying loans on time, you are usually rewarded with a lower rate. In Uganda, the Credit Reference Bureaus licensed by the Bank of Uganda help lenders track your repayment behavior. On the other hand, if you have defaulted before, you may be considered a higher risk and charged more.
The type of loan also makes a difference. Short-term emergency loans or unsecured loans often come with higher interest rates because there is no collateral attached. Long-term loans like mortgages are usually cheaper because they are backed by an asset like a house or land.
Collateral is another big factor. If you pledge something valuable — like a car, land, or even savings — lenders feel safer and offer you lower rates. Without collateral, the lender carries more risk, and that shows up as a higher interest charge.
Your income and job stability count as well. Someone employed in a stable, salaried job may get a better rate compared to a market vendor with irregular earnings. Lenders feel more confident that a salaried worker will keep up with repayments.
Relationships with lenders matter. If you have been saving with the same bank for years, or if your salary is processed through that bank, you may be offered better terms than a new customer who has no prior relationship with them.
Finally, the type of institution itself plays a role. Traditional banks usually have higher operating costs — branches, staff, and compliance requirements — while fintech lenders like Fido can operate more leanly and sometimes offer more competitive rates.
Uganda’s financial system has its own dynamics that make this even more interesting.
First, most Ugandans work in the informal sector. According to the Uganda Investment Authority, over 70 percent of employment comes from small businesses, market traders, boda boda riders, and similar jobs. Many of these workers do not have land titles or cars to use as collateral. That means they often face higher borrowing costs simply because they lack the assets banks traditionally want to see.
Second, Uganda has some of the widest banking spreads in Africa — meaning the difference between what banks pay savers and what they charge borrowers is very large (International Growth Centre). So even when deposit rates go up, loan rates can remain painfully high.
Third, while the government has introduced a cap for microfinance and moneylenders — limiting them to charging 2.8 percent per month, or about 33.6 percent per year (Observer Uganda) — this is still much higher than the rates on some secured loans from banks. For borrowers without collateral, this is often the only option.
And lastly, we are seeing the growth of digital lenders. Fintechs like Fido are using mobile technology and alternative data sources, like mobile money transactions, to assess risk and offer credit. This opens the door for many people who could never access bank loans before. While the rates may still reflect higher risk for first-time borrowers, customers can unlock better rates over time by building a repayment record.
The good news is that borrowers are not powerless. There are steps you can take to improve your chances of qualifying for a more affordable loan in the future.
Paying your loans on time is the most important habit. Every repayment builds your credit history and makes you look less risky to lenders. Saving with your bank or lender is also helpful because it creates trust and shows that you are financially responsible.
Borrowing only what you need and keeping your debts manageable helps you avoid defaults, which can damage your record. It also pays to shop around — do not accept the first loan offer without checking what other lenders provide. And if you use digital loans from providers like Fido, treat them as a stepping stone. Repaying them consistently can help you graduate to lower rates and bigger loan amounts.
So, why are interest rates not the same for all borrowers? Because every borrower is different. Lenders consider risk, collateral, income, credit history, the type of loan, and even the operating model of the institution. In Uganda, where many people are unbanked or working informally, these differences can be even sharper.
But the situation is not hopeless. By understanding how lenders think and building a strong repayment record, you can steadily improve your chances of accessing better rates. At Fido, our goal is to make borrowing more inclusive, fair, and transparent. We believe everyone deserves a chance to grow their business, support their family, and take control of their financial future.
