Imagine a young innovator in Kampala with a promising idea. Instead of refining their product or chasing customers, they’re drafting grant proposals, tailoring pitches to donor priorities, and attending endless workshops-not because they want to, but because they must. This happens a lot in Uganda: donor funding eclipses local investment, banks avoid risk, and family savings are too thin to rely on. To survive, many entrepreneurs become ‘grantpreneurs’-founders who win grants more often than customers. It’s a rational response, but one that bends innovation toward funder tastes rather than real markets.
Those tastes shift constantly. Today it’s Artificial Intelligence (AI), tomorrow climate resilience, next month green energy, then financial inclusion or agtech.
Each shift sends founders scrambling to rewrite their business models. This constant pivoting illustrates the cash-strapped nature of Uganda’s startup ecosystem.
What are the implications?
The result is a startup culture where survival depends less on vision or persistence than on agility in chasing the fashion of the day. ‘Ugandans are excellent innovators and are considered among the most entrepreneurial people in the world. However, innovation does not occur in isolation; it relies on a supportive ecosystem,’ Mr Japheth Kawanguzi, founder of The Innovation Village, says. Mr Kawanguzi points to policies, capital, market access, and technological readiness as critical gaps.
‘Kenya’s ecosystem, for example, is more mature than Uganda’s, providing innovators with better support and funding opportunities. By building a better ecosystem, we can foster more successful entrepreneurs who don’t live to please donors,’ he adds. To see how startups can move beyond ‘grantpreneurship,’ look at those that have made the leap: Rocket Health, Xente, Ensibuuko, MobiPay, Numida, the Agency Banking Company (ABC), and Wazi. ABC, for instance, began like many others, with donor money. Financial Sector Deepening (FSD) Uganda provided technical support to design its structure and strategy; ABI Trust funded its first point-of-sale devices; and the Deutsche Gesellschaft fr Internationale Zusammenarbeit (GIZ) underwrote early agent recruitment and awareness campaigns.
From inception, it was a donor-backed project. The difference is that it didn’t stay one. ABC built a business solving two problems at once: banks needed a cost-effective channel to extend services, and consumers needed easier access to financial products. ‘Ultimately, what we were able to figure out is that there was an opportunity. to solve a pain point for the banks and deliver value both for them and for the final consumers,’ recalls Chief Executive Officer (CEO) Richard Jabel.
The early days were precarious. With one bank and fewer than 100 transactions a day, the company could barely cover salaries.
But instead of stalling, the team persisted, onboarding banks one by one until scale took shape. The technical challenge was equally tough. ABC built a shared, multi-tenant platform-rarely attempted elsewhere-allowing competing banks to use the same distribution channel. Convincing rivals to cooperate was hard; integrating their different technologies, monitoring systems, and risk frameworks even harder. The team had to anticipate failures, manage risks, and respond instantly to breakdowns. In agent banking, where funds flow across institutions and agents, even a small error could trigger system-wide consequences.
What else did ABC do?
Once stability came, the next hurdle was investment. ABC needed capital, but donors couldn’t take it further. Through FSD Uganda’s Deal Flow Facility, the company went through the painstaking process of becoming ‘investor-ready.’ That meant rethinking its pitch from the investor’s perspective. ‘They principally want to know three things,’ Mr Jabel says. ‘What’s the opportunity? Is the customer willing to pay? And does unit economics make sense?’ Answering those questions required evidence: paying clients, consistent revenue growth, and margins that proved the model worked.
It also demanded execution capacity. Investors needed confidence that ABC wasn’t a one-man show but a company with governance structures, leadership depth, and ownership of its intellectual property. Cleaning up shareholding, strengthening the board, and passing due diligence were all part of the process. Equally critical was clarity on strategy and capital use. ABC had to map out a five-year plan showing how it could grow into a billion-dollar company, not a dream, but a feasible roadmap.
The real breakthrough, however, was discipline in choosing the right kind of capital. That meant knowing exactly how much money was needed, where it would go, and how fast it could be absorbed. Perhaps the most profound lesson ABC learned was about the kind of capital to seek. Not all money is good money. ‘Some money will hang you,’ warns Mr Jabel. The company deliberately sought patient investors aligned with its vision of financial inclusion, those who understood that margins are thin and returns long-term.
The wrong capital, by contrast, could have forced ABC into sleepless nights and unsustainable growth targets. What ABC built was more than a business. It became an ecosystem solution: shared infrastructure expanding financial access nationwide, underpinned by governance, investor confidence, and patient capital. Its story illustrates one path out of donor dependency, solving systemic problems for real markets with sound governance and long-term capital.
Are there other challenges?
Even for those who avoid the project-manager trap, another challenge looms: building too small for too small a market. Startups design microloans, microinsurance, and microsavings schemes to serve low-income users. While this expands access, it rarely creates the scale or sustainability depth markets require. ‘It is fantastic to design a product that a poor man will be able to afford with their little income,’ he notes, ‘but in absolute terms. there is not so much you can do with Shs500 even if it earns you a 20 percent return,’ Mr Joseph Lutwama, the head of research and insights at FSD Uganda, says.
Too much of Uganda’s innovation, he argues, has focused on ‘micro’-microfinance, microinsurance, microsavings-without addressing the reality that smallness reproduces smallness. ‘A business built on tiny transactions struggles to generate value. As a result, many fintechs remain stuck: their products are too small to sustain themselves, forcing reliance on grants or subsidies to survive,’ he explains.
This is why FSD Uganda began promoting what Mr Lutwama calls a ‘platform strategy’: a holistic approach that sees the challenge not as designing cheaper products, but as fixing dysfunctional markets. ‘Financial markets are driven by value,’ he explains, ‘and value comes from buyers and sellers transacting regularly. Unless there is an exchange of value, there will be no need for money and financing.’
Much of Uganda’s ‘last mile’ consists of subsistence households rather than vibrant communities. With little cash and few transactions, they remain unattractive to banks or insurers that depend on volume and value. ‘No amount of tweaking products for the poor can produce scale when the underlying markets are too thin,’ Mr Lutwama says. Agricultural insurance illustrates the point: without subsidies, most smallholder farmers cannot afford premiums, making the product unviable once grants end, the Bank of Uganda Governor, Mr Michael Atingi-Ego, has previously noted.
Mr Lutwama believes the real opportunity lies not in mimicking banks or microfinance institutions, but in leveraging technology to build digital marketplaces. He argues that markets thrive on information, and fintechs are, at their core, information businesses. ‘By connecting buyers and sellers, reducing information asymmetry, and creating transparency, fintechs can catalyse the economic activity that financial services depend on. Your best case is not in becoming a bank,’ he argues, ‘but in building viable and vibrant digital marketplaces where different economic activity can thrive. The moment economic activity begins thriving, money will flow to those places.’
The lesson here is that financial services follow economic activity, not the other way around and that is why banks cluster in cities, where commerce is dense. Indigenous successes like Rocket Health, Xente, Ensibuuko, MobiPay, and Wazi show what happens when companies solve genuine problems and deliver customer value. Their stories prove that the ‘grantpreneur trap’ is not inevitable; with the right ecosystem, Uganda can produce scalable, impactful businesses.
As Kawanguzi emphasises, policy is central. Governments elsewhere are already leading: Tunisia’s Startup Act in 2018 and Senegal’s in 2019 created frameworks that attracted investment, eased incorporation, and incentivised digital entrepreneurship.
Uganda’s own Startup Act, still in development, offers a chance to do the same, galvanising the entrepreneurial community and shifting the balance from donor-driven survival to market-driven growth.