Uganda’s micro, small and medium enterprises (MSMEs), which employ over 90 percent of the country’s workforce and account for more than 70 percent of businesses, are at risk of being left behind in the digital economy due to low digital literacy, limited access to affordable devices, and restrictive policies, industry experts have warned.
The remarks were made during a High-level MSME Digital Economy Dialogue with stakeholders discussing how to leverage digital transformation in charting a path to growth and expansion for small businesses in Uganda.
John Walugembe, Executive Director of the Federation of Small and Medium Enterprises (FSME), said emerging technologies such as artificial intelligence, blockchain, and robotics are transforming productivity worldwide.
Yet, most Ugandan MSMEs lack the skills and infrastructure to harness these innovations.
“The biggest challenge faced by MSMEs at the moment is the low levels of digital literacy. They lack the critical skills to use digital tools maximally,” Walugembe said.
Walugembe emphasised that the majority of MSMEs operate informally, particularly in rural areas, and rely on basic business practices.
This lack of digital engagement limits their ability to improve transparency, boost efficiency, and expand their markets.
“Digital transformation can improve transparency, increase margins, and boost efficiency in logistics and payments. Unfortunately, this agenda has not yet been embraced by MSMEs,” he said.
According to Walugembe, low digital literacy, limited access to affordable smartphones and tablets, and concerns over fraud and privacy are the primary barriers preventing MSMEs from adopting digital tools.
Gender disparities are also widening, leaving women further behind in the uptake of technology.
“Access to smartphones, especially for MSMEs in rural areas, is still a challenge that needs urgent addressing,” he said, highlighting a pilot digital subsidy programme implemented with the Uganda Communications Commission (UCC).
Walugembe urged stakeholders involved in digital skilling initiatives to coordinate their efforts aim to equip entrepreneurs with practical digital skills.
Richard Ndahiro, Regional Technical Specialist for East and Southern Africa at the United Nations Capital Development Fund (UNCDF), echoed Walugembe’s concerns, stressing that digital solutions must be meaningful and directly address the needs of rural and informal businesses.
“You and I only pay attention to something we find useful. The question is — do we really have the right solutions for these businesses?” Ndahiro said.
He argued that digital tools would only gain traction if they help MSMEs access finance, manage operations, or reach larger markets.
He cited mobile money as an example of a solution that achieved rapid adoption because it met tangible business needs.
Ndahiro also noted that while smartphones are becoming more affordable through payment plans and subsidies, many rural entrepreneurs continue to struggle to justify the investment without clear benefits to their businesses.
“The fundamental issue we need to tackle as an ecosystem is identifying what is meaningful for the business,” he said, urging innovators, policymakers, and development partners to align solutions with the commercial incentives of low-income enterprises.
James Beronda, Director of the Universal Service and Access Fund (UCUSAF) at the UCC, stressed that providing infrastructure and devices alone would not be sufficient to transform Uganda’s digital economy.
Digital literacy, he said, is essential to ensure that MSMEs can fully utilize available tools and government services.
“You must provide access, provide the right infrastructure, provide devices but most importantly, provide the right digital skills. When people do not have those skills, they cannot fully utilise the digital solutions government is putting up,” Beronda said.
UCUSAF is funding digital skilling programmes targeting youth, women, farmers, and MSMEs, including informal workers such as boda boda operators, mechanics, saloon operators, and micro-retailers. Beronda described the training as “basic but essential,” noting that simple tasks like using Google Maps or digital payments remain difficult for many Ugandans.
“Our responsibility as a Commission is to ensure inclusive communication. Everyone must be involved in the digital economy,” he said.
Beronda said UCC relies heavily on private sector partners to deliver these programs, citing FSME’s extensive network as a key asset for reaching businesses across the country.
Walugembe also criticised government policies that he said hinder MSME digital adoption.
He questioned the excise duty on mobile phones and urged the reopening of social media platforms such as Facebook, which remain critical marketplaces for small businesses.
“The starting point is to let smartphones come in tax-free. The digital economy cannot grow while entry barriers remain high,” he said.
Beronda acknowledged the challenge of balancing affordability with government revenue needs.
UCC is exploring device financing programmes and advocating for reduced taxes on entry-level smartphones while supporting local assembly initiatives to further lower costs.
“We have seen some local companies making a few smartphones and tablets. That is a welcome initiative and hopefully it can go a long way in addressing affordability,” Beronda said.