1. The Context: East African Financial Integration

East Africa’s economic integration continues to deepen across trade, infrastructure, and financial markets. A key enabler is efficient cross‑border lending and payments, especially between major partners—Uganda and Kenya. Uganda, being landlocked, relies heavily on Kenya’s Mombasa port for exports and imports, making effective trade financing essential. Furthermore, regional frameworks like the East African Payments System (EAPS) and PAPSS aim to streamline cross-border transactions.

• The EAPS, launched in 2013, integrates the RTGS systems of Kenya, Uganda, and Tanzania—allowing same-day, real-time fund transfers in local currencies using SWIFT messaging.Bank for International SettlementsEast African Community
• In the 12 months to June 2024, EAPS processed over $2 billion in cross-border transactions—a 40% increase—highlighting growing intra-EAC trade levels.The EastAfrican
• More recently, the Pan-African Payment and Settlement System (PAPSS) offers continental payments in local currencies, simplifying trade beyond USD corridors.RedditKikubo Lane

So, while platforms like EAPS and PAPSS are technological foundations, banks remain vital for trade financing between Uganda and Kenya.

2. Legal Landscape: Legality and Compliance

2.1 Past Ambiguities and Court Rulings

Cross-border lending in East Africa has faced regulatory uncertainties:

• A 2020 Uganda High Court ruling in the case of DTB Kenya & DTB Uganda found that DTB Kenya’s loan to Ugandan firms without previous authorization from the Bank of Uganda was illegal. This triggered concern in syndicated loan markets.The EastAfrican

2.2 Recent Clarity from Courts

Fortunately, this legal ambiguity has since been clarified:

• In August 2025, the High Court of Uganda, in Simbamanya Estates Ltd v Equity Bank (U) Ltd and others, reaffirmed that the Financial Institutions Act does not prohibit cross-border lending by foreign banks—as long as they are not deposit-taking institutions or operating without licenses. A local bank serving as an agent in syndicated loans is lawful.Mondaq

This clarity encourages regional and international financiers to reengage in cross-border lending with greater confidence.

3. Institutions Enabling Cross‑Border Lending

3.1 Commercial Banks with Regional Presence

Several Kenyan banks operate in Uganda and provide cross-border facilities:

• NCBA Bank Uganda (formerly Commercial Bank of Africa Uganda) is a Kampala-based subsidiary of NCBA Group (Kenya), serving corporations, NGOs, and high-net-worth clients.Wikipedia
• Exim Bank Uganda, part of the Exim Bank East Africa group, originated from Tanzania and offers corporate and trade banking services.Wikipedia
• These banks can offer trade finance instruments like Letters of Credit, pre- and post-shipment financing, structured trade finance, and guarantees—critical for importers and exporters across the border. One example is KCB Uganda, which promotes such solutions for local and cross-border trade.ug.kcbgroup.com

3.2 Regional Financial Institutions

Two key institutions based in Uganda support cross-border development finance:

• The East African Development Bank (EADB), headquartered in Kampala, offers loans, leasing, trade finance, equity, and real estate financing tailored to regional development. As of 2022, its assets were approximately US $416 million.Wikipedia
• The Trade and Development Bank (TDB) (ex-PTA Bank), serving eastern and southern Africa, also finances regional trade through institutional support and syndicated facilities.Wikipedia

4. Trade Finance Mechanisms in Action

4.1 Common Trade Finance Instruments

Commercial banks—especially those with cross-border networks—offer key instruments to facilitate commerce between Uganda and Kenya, including:

• Letters of Credit (LCs): Ensuring payment to exporters once terms are met, reducing trust risk.ug.kcbgroup.com
• Pre- and Post-shipment financing: Offering working capital for exporters, or bridging payment timing gaps.ug.kcbgroup.com
• Structured Trade Finance: Based on commodity flows rather than collateral-heavy structures, easing access for producers.ug.kcbgroup.com
• Guarantees and Documentary Collections: Providing payment assurances and smoother paperwork for importers/exporters.ug.kcbgroup.com

Such tools are accessible through banks like KCB, NCBA Uganda, or Exim Bank, enabling Ugandan exporters to trade confidently with Kenyan importers and vice versa.

4.2 Mobile & Fintech Lending Ecosystem

Fintech innovations are expanding digital lending and cross-border services:

• Ensibuuko, a Ugandan fintech, supports microloans via cooperatives (SACCOs), allowing entrepreneurs quick access via mobile—building credit histories crucial for trade finance scale-up.Kikubo Lane
• MTN MoMo now offers services akin to savings, loans, and investments. Its platform interconnects Uganda and Kenya, facilitating immediate transfers via mobile money.Kikubo Lane
• Note: Regulatory fragmentation still complicates cross-border fintech expansion—diverse licensing and currency handling requirements persist.Kikubo Lane

5. Regional Platforms and Integration Challenges

5.1 Payment Interoperability

Despite robust domestic fintech ecosystems, cross-border interoperability remains a challenge:

• The East African Payments System (EAPS) has improved cross-border settlements, but uptake is low and costs remain relatively high.East African CommunityThe EastAfrican
• Efforts like the EARDIP workshop (2025) under EAC and IGAD, supported by the World Bank, focus on harmonizing legal, regulatory, and technical frameworks for payments across East Africa.East African Community

5.2 Fintech and Regulation

The lack of unified regulation hinders fintech-led cross-border lending:

• At a regional conference in Kampala, fintech leaders and regulators stressed the importance of harmonized licensing and unified frameworks to enable seamless financial services across Uganda and Kenya.Kikubo Lane
• As one fintech CEO stated: “You need a license in every East African country you operate in… Regulation has become far more developed… but there is still more to be done.”Kikubo Lane

6. Challenges and Opportunities

6.1 Challenges

• Regulatory uncertainty: Past court rulings such as the DTB case created hesitancy among lenders. Recent clarification helps—but frameworks need institutional reinforcement.
• Payment system inefficiencies: Cross-border payments via EAPS are still slow or costly, causing some parties to rely on correspondent banks.
• Inconsistent regulations across countries: Trade finance initiatives are hampered by different regulatory environments that discourage scale.
• Fintech fragmentation: Lack of regional licensing hinders pan-East African digital financial access.
• Information and credit data gaps: Limited credit history and fragmented logistics undermines risk assessment.Reddit

6.2 Opportunities

• Regulatory clarity: The 2025 High Court decision empowers cross-border lending confidence.
• Growing trade volumes: EAPS’s record $2 billion transactions demonstrate tangible demand.
• Developing regional platforms: PAPSS and EARDIP seek to reduce reliance on global systems and harmonize payments.
• Fintech innovation: Solutions like Ensibuuko and mobile money lending are unlocking access for SMEs.
• Regional institutions: EADB and TDB provide tailored trade finance and development capital.

7. The Way Forward: Recommendations

Stakeholder	Recommendation
Central Banks (Bank of Uganda, CBK)	Improve policy clarity and licensing frameworks; support unified fintech regulation.
Regional bodies (EAC, IGAD)	Accelerate payment systems interoperability (EAPS, EARDIP); coordinate fintech licensing.
Commercial Banks	Expand trade finance offerings; leverage digital platforms to support SMEs.
Fintechs	Advocate for harmonized licensing; scale cross-border lending tools.
Borrowers/Traders	Engage with structured trade finance; build formal credit records.
Developers & Donors	Invest in digital infrastructure; support harmonization initiatives and credit data systems.

8. Summary: Uganda–Kenya Cross‑Border Lending Landscape

Uganda and Kenya are deeply interlinked through trade and financial markets. While regulatory and infrastructural gaps persist, growing trade volumes, legal clarity, and fintech-led innovation are paving the way for more seamless cross-border lending:

• Banks with regional footprints (NCBA, Exim, KCB) provide essential trade finance products.
• Legal clarity from recent court rulings enhances investor confidence.
• Payment systems like EAPS and PAPSS offer real-time local currency settlement—though interoperability needs improvement.
• Fintech solutions expand inclusion, particularly for the informal sector.
• Regional institutions (EADB, TDB) offer development-focused financing to bridge sustainability gaps.

In conclusion, Ugandan banks—including locally rooted and cross-border institutions—play a pivotal role in facilitating trade and finance with Kenya. While systemic and regulatory improvements remain necessary, the architecture for robust, inclusive, and efficient cross-border lending is increasingly in place. Continued collaboration among institutions for harmonization, infrastructure, and legal clarity will further unlock the full potential of East African economic integration.