MSE Recovery Fund at One Report

MSE Recovery Fund at One Report

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    The Micro and Small Enterprises (MSE) Recovery Fund was launched on February 24, 2022. The fund aims to facilitate access to finance directly to 50,000 MSEs (at least 40% women and 30% youth). This is with an objective to shorten the recovery trajectory of youth and women-owned and operated businesses from the COVID-19 pandemic effects, by providing their businesses with much-needed capital injections. In turn, this is expected to jumpstart the economic livelihoods of entrepreneurs to secure and create job opportunities for young women and men in Uganda.

    Six microfinance institutions and SACCOs (Tier III and Tier IV financial institutions) have received funds to on-lend to small and medium enterprises recovering from the effects of the Covid-19 pandemic.
    These are; Pride Microfinance Limited, FINCA Uganda, Lyamujungu Cooperative Financial Services, Mushanga SACCO Limited, Hofokam Limited, and UGAFODE Microfinance Limited, operating across the country.
    Jointly, the institutions have on-lent UGX 13.42bn to 10,832 MSEs at an average interest rate of 16.0%. So far, the funds have been disbursed to 40% of youth and 55% of women. The average ticket size borrowed is UGX 950,000.


    Narrowing the gender gap in digital agricultural platforms

    Narrowing the gender gap in digital agricultural platforms

    Women are highly engaged in agriculture and rural economies, as labourers, consumers, and producers, both for markets and their households. According to the Consultative Group to Assist the Poor (CGAP), an estimated 79% of economically active women in developing countries report agriculture as their primary activity. However, there are gaps in women’s productivity due to: a lack of land ownership, lower access to quality inputs, credit, and training, less access to paid and unpaid family labour, smaller land sizes for cultivation, and restrictive norms e.g., focusing women on low-value crops. In many value chains, women provide most of the labour, but payment for outputs goes directly to men. This discourages women from supporting productivity growth and limits their economic potential.

    Digital agricultural platforms can boost farmer productivity but also risk entrenching gender inequalities if not gender intentional. Research shows that only 25% of Sub-Saharan Africa digital agricultural platform users are women and are not served sufficiently. To focus the FSD Uganda-supported digital platform partners on being gender-intentional in their business models, FSD Uganda held a “Gender in Agricultural Platforms” co-creation workshop with Emata Uganda Ltd, Ensibuuko Tech Ltd and Quest Digital Finance Ltd.

    Gender co-creation activity

    The engagement raised awareness of the gender issues in agricultural value chains. It also allowed each of the partners to reflect on how these issues manifest in the customer journey starting from acquisition, credit scoring/financing, impact, retention, and advocacy.

    The key takeaway from the gender co-creation workshop was a curated list of best practices that these platforms can adopt to create shared value for the platforms and the women that engage with them. For gender intentionally, the partners were tasked to prioritise the best practices for adoption, indicating how to implement them and the relevant support that may be required. This is an activity all stakeholders in the digital agricultural platforms space can partake in to bridge the gender gap in the platforms.

    A word from the participants

    This is what participants had to say about how gender gaps in digital agricultural platforms can be reduced.

    “One-way platforms can be more intentional about reaching women is through the financing mechanisms like the payment mechanism for the sale of agricultural products – these could use different acquisition strategies to reach female farmers including focusing on female-focused value chains. We can also consider women-based agent network models and others that might be more effective at impacting women not just reaching many women,” Julie Zollman, FSD Network Gender Collaborative Programme.

    “We need to focus on business activities that women are actively involved in for better inclusion such as catering services, poultry and identify how we can help them diversify on digital platforms. We can also skill them up to make their businesses profitable,” Winnie Namubiru, Quest Digital Finance Ltd.

    “Gender is a very important aspect of our business because it promotes specificity right from the organisation level through how we offer services. It is important to us given that our clientele are rural poor in saving groups with 80% of members being female. So, my key takeaway is to identify gender gaps in the value chains and be able to offer appropriate value chain financing products that will most influence specificity from all angles,” Roger Nyakahuma, Ensibuuko Tech Ltd

    “We want dairy farmers to dream big and we cannot achieve this dream without involving both females and males. This is key for maximum impact on the farmers’ lives. Going forward, we need to combine both tech-based solutions with on-ground field support to enable us to bridge the gender gap and encourage more women to understand how to use financial services and embrace technology,” Lillian Nassanga, Emata Uganda


    Bridging the gap between youth and access to financial services

    Bridging the gap between youth and access to financial services

    Social norms, product suitability and lack of collateral are some of the hindrances to inclusive finance for women and youth cited by the Mastercard Foundation partners under the Young Africa Works Program in Uganda.

    This was discussed during the launch of the Young Africa Works community of practice on inclusive finance in January 2023. Inclusive finance means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit, and insurance – delivered in a responsible and sustainable way.

    The community of practice on inclusive finance will provide a platform to convene and share ideas, resources, and lessons on a wide range of topics related to financial inclusion. It is one of many collaborative and intentional approaches of the Mastercard Foundation Young Africa Works program to ensure more impactful delivery and achievement of benefits for young people.

    “The ultimate intention of the community of practice on inclusive finance is to deepen understanding of the various aspects of inclusive finance and drive a more collaborative and intentional approach to program implementation,” said Arnold Byarugaba the Foundation’s MSME Finance Lead during the launch.

    Composed of all partners under the Young Africa Works program in Uganda, the community of practice on inclusive finance will review ongoing challenges, gains, and opportunities affecting financial inclusion within the Young Africa Works interventions in Uganda and pivot accordingly to achieve greater impact.

    During the first gathering, partners learnt from each other what others are doing to sustainably enable young people in work. Group discussions brought to light the financial inclusion gaps for each partner as well as recommendations on how these can be filled or addressed for that matter.

    Even though the community of practice on inclusive finance membership is primarily for Young Africa Works partners, bridging the gap between youth and access to financial services isn’t exclusive to the partners. Establishment of the community is evidence that all stakeholders seeking to impact youth need to reflect on their financial inclusion gaps, come up with solutions on how they can be bridged and implement them.

    A steering committee was set up and is responsible for both governance and technical aspects of running the community of practice on inclusive finance, including tasks such as setting or reviewing the community’s objectives. Going forward, meetings will be held on a quarterly basis tackling different themes that are relevant to the impactful implementation and deepening access to finance amongst women, youth and refugees under the Young Africa Works Programs funded by the Mastercard Foundation.

    Since its launch, one quarterly meeting has been held in March 2023. The theme of the meeting revolved around ‘unlocking access to finance partnerships for program participants’.  A key highlight from the meeting is acknowledgement that traditional financial institutions are not sufficient to meet the needs of startup enterprises yet majority of these make up the Young Africa Works target group. Partners agreed to intentionally craft solutions on how to meet the finance and growth needs of businesses at ideation and start up stage.

    About the Young Africa Works Program

    The Young Africa Works Program works closely with key stakeholders to enable young women and men, including refugees, internally displaced youth, and those living with disabilities, to acquire the skills needed to find employment or create work opportunities. Financial sector Deepening Uganda is leading the partnership on financial inclusion.


    Rapid Gender Assessment of the Horticulture and Dairy Value Chains in Uganda

    Rapid Gender Assessment of the Horticulture and Dairy Value Chains in Uganda

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      A rapid assessment to obtain insight into women’s economic opportunities within the dairy and horticulture value chains was commissioned by the FSD Network Collaborative Gender Programme to support FSD Uganda.

      This report presents insightful findings from the literature reviewed and a field study conducted in selected districts across the tomato and dairy value chains in Uganda. The report provides an overview of the transformative potential on rural women’s livelihoods per value chain, and further explores interventions supporting women to achieve greater resilience, increase their income and exercise greater decision-making.

      The findings of this report will aid development of interventions in line with FSD Uganda’s mandate, under which it works with both public and private sector players, to develop sustainable improvements in the livelihoods of low- income individuals (particularly women) through reduced vulnerability to shocks, increased incomes, and employment creation.


      FSD Uganda pilots platform economy masterclass

      FSD Uganda pilots platform economy masterclass

      Simply put, the platform economy is economic and social activity facilitated by platforms. A platform business is a multi-sided model focused on creating value by facilitating interactions between two or more interdependent groups usually, consumers and producers. The common forms of interactions between the groups include selling, buying, and sharing of goods and services. Common examples of platforms include Facebook, Amazon, Airbnb, SafeBoda and Uber.

      In early March 2023, FSD Uganda run the first platform economy masterclass. Attended by the first cohort, the recently developed curriculum was piloted during the five-day class.

      The inaugural masterclass was attended by 24 participants in the platform economy drawn from ecosystem enablers such as, AgriTechs, HealthTech, Fintechs, and others.

      The masterclass seeks to support technology platform entrepreneurs to enhance their business models, diversify their income streams, and revamp their value propositions. Additionally, it seeks to see the businesses expand their customer base and collaborate or partner with other ecosystem players (both locally and globally) and deepen financial inclusion, thus improving the ecosystem they serve.

      More cohorts of the platform economy masterclass will be conducted to obtain industry and participant feedback to enable the refinement of the curriculum.

      Ultimately, FSD Uganda intends to enable the ecosystem to run the masterclass as a regular program for capacity building of platform economy participants and ecosystem enablers. The target participants include fintechs, agritechs, MSMEs, financial services providers, consumers, development partners, etc. This is expected to spur the growth of Uganda’s nascent platform economy.

      This is what some of the participants from the first cohort say about the masterclass.

      “During the class, we got insights into case studies which showed us what has worked before in other countries. For us in the agriculture industry, we have learnt about how the likes of Twiga Foods in Kenya are operating and that provided valuable information on how to scale” says, Annet Nanyanzi, Co-founder, Green Shares Limited.

      “I have understood better what digital and platform economy is and how to make money in the different business models as well as the risks involved. The case studies were very helpful in aiding my understanding. The most important thing is how we are going to apply what we learnt to help us scale faster – we know that we must move away from just providing the products to facilitating the transaction on the platform so that we reach more users within a short time,” Zilla Arach Mary, Chief Products, and Innovation Officer, EzyAgric said.

      “The masterclass provided useful tips and insights and different business models that we can apply to grow our customer base. The different case studies for example the talk by SafeBoda enlightened us on how best we can improve our services, our infrastructure, and reduce costs. Because of the class, we will be able to redefine our products and provide better service to our customers,” says Michael Francis Kalyango, the Chief Technical Officer at Quest Digital Finance.


      Embracing digitalisation in agriculture for inclusive growth

      Embracing digitalisation in agriculture for inclusive growth

      By Geoffrey Okidi

      The COVID-19 pandemic was a wake-up call for businesses across various sectors to develop plans to ensure business continuity amidst disruptions of that magnitude. Most of these plans include embracing digitalisation.

      For economies such as Uganda’s which are heavily dependent on agriculture, Digitalisation in agriculture can be a sector game changer. Digitalisation for agriculture is the use of digital technologies, innovations, and data to transform business models and practices across the agricultural value chain. This in turn helps address bottlenecks in productivity, postharvest handling, market access, finance, and supply chain management. This aims to achieve greater income for smallholder farmers, improve food and nutrition security, build climate resilience, and expand the inclusion of youth and women.

      Financial Sector Deepening Uganda’s 2020 study on the impact of COVID-19 on agricultural finance in Uganda in September 2020 affirms the importance of digitalisation. The study points out that the lack of digitisation along the agricultural value chain exacerbated firm-level economic effects indirectly caused by COVID-19 measures. The study points out opportunities for digitisation that could have saved the day and fostered greater resilience to the impact of the COVID-19 lockdown measures. The study notes that there was a sudden growth in e-commerce (for example, door-to-door delivery) by 100 to 300 percent in some cases, albeit off a very low baseline, showing underlying demand for digitisation.

      According to McKinsey Global Institute’s 2016 study titled Digital Finance for All: Powering Inclusive Growth in Emerging Economies, digital technologies cut the cost of providing financial services by 80 to 90 percent.

      Findings of a similar study conducted by aBi Finance on the performance of SACCOs during COVID-19 lockdown are consistent with the McKinsey Global Institute Study. The aBi Finance study found that during the COVID-19 lockdown, fully digitalised SACCOs performed much better in terms of loan portfolio quality and savings mobilisation than their non-digitalised counterparts.

      Uganda and other East African countries have some of the most conducive conditions for increasing uptake of digital finance technologies in the agricultural sector (about 56 percent of adults are already using mobile money – FSD 2018). However, agricultural payments in Uganda remain predominantly cash-based and many people remain unbanked (Better Than Cash Alliance, 2017).

      To reap from the potential benefits of digitisation of the agricultural value chain, there is need to address the key challenges hindering it. According to the UN Capital Development Fund, the key challenges to digitalisation in Uganda are:

          • Low education levels, fluctuating incomes, price sensitivity/preference to pay with cash amongst many consumers
          • Formal financial exclusion and limited usage of available financial services
          • Limited infrastructure for digitalisation, for example, poor mobile network, high costs of mobile network expansion and maintenance
          • Gaps in the policy and regulatory environment, for example, SIM registration requirements were thought to limit smallholders’ access to mobile phones
          • Many agribusinesses do not have the internal systems in place to take advantage of digitalisation
          • Challenges in managing a national level digitalisation programme given diversity of languages across Uganda

      To accelerate transformation in the agriculture sector, hindrances to the adoption of digitalisation must be addressed. According to The Digitalisation of African Agriculture Report 2019, Digitalisation for Agriculture solutions are categorised into five primary use cases: (i) advisory and information services; (ii) market linkages; (iii) supply chain management; (iv) financial access and (v) macro-agricultural intelligence. The report highlights the recommendations below to stakeholders to address the challenges in digitalisation.

      Recommendations to address the challenges to digitalisation
      To improve use, drive greater inclusivity, impact and reap the benefits of digitalisation of agriculture, priority should be placed on the following:

          • Development of human capital at every level of the digitalisation for agriculture ecosystem, including increasing awareness of digitalisation for agriculture, improving digital literacy and, greater digital skill building among actors across the agricultural value chain
          • Driving greater business model sustainability by, for instance, improving value for farmers, identifying, and promoting successful business models and mobilising funding to support a more diverse set of companies
          • Creating greater impact by making digitalisation for agriculture solutions more inclusive of women and other marginalised groups, as well as smallholders in geographies with relatively less digitalisation for agriculture investment
          • Investment in the missing middleware infrastructure. Successful digitalisation for agriculture solutions require access to a wide range of data (from remote sensing data to farmer-specific data) to deliver high-quality services to farmers
          • Investment in good data stewardship and designing for the risks and limitations of digital systems
          • Investment in the digitalisation for agriculture knowledge agenda
          • Creating an alliance of key digitalisation for agriculture stakeholders to promote greater investment, knowledge sharing and partnership building

      Supporting development of the National Fourth Industrial Revolution Strategy

      Supporting development of the National Fourth Industrial Revolution Strategy

      Technology has completely revolutionised the way we do business; it is growing in various industries and will change all aspects of life. That is why the Third National Development Plan (NDP III) Digital Transformation Programme goal for Uganda is to increase ICT penetration and use of ICT services for social and economic development. One of the key focus areas for the government is to support the development and uptake of emerging technologies such as Fourth Industrial Revolution technologies, writes Judith Nabakooba, former Ministry of Information Technology and National Guidance (MICT-NG). To implement this, it was deemed important to develop the National Fourth Industrial Revolution (4IR) Strategy.

      Digital technologies, if harnessed, can support the country attain its social and economic goals including financial inclusion. For the financial sector, the value of 4IR solutions resides in the development of use cases that can reduce the cost of serving existing consumers as well as acquiring new ones, making new business models possible for previously unreachable demographics. Several financial service providers have adopted these technologies to minimise inefficiencies in their businesses, manage customer and business risk, and create more seamless experiences for their customers.

      The Financial Sector Deepening (FSD) Uganda, under its work on developing an inclusive financial system (infrastructure and environment) to support the digital economy, joined the Expert National Task Force on the Fourth Industrial Revolution to support development of the strategy.

      To kick start the process, an in-depth foundational assessment of Uganda’s 4IR opportunities and readiness was conducted to identify the areas that must be further developed to achieve these objectives. The approaches taken by peer countries in formulating national fourth industrial revolution technology strategies were also considered. A comprehensive process of local stakeholder consultation to reflect the country’s developmental objectives was conducted and their input was included.

      The findings from the assessment later informed the strategy which identifies opportunities in the Ugandan economy where 4IR applications would have the most significant positive impact and critical enablers required for execution. The strategy also specifies mechanisms to ensure the interventions are implemented effectively and efficiently. The identified opportunities are:

        • Unlocking productivity in agriculture by enhancing small-holder productivity from pre- to post-harvest to increase outputs to the value of 2% of GDP each year.
        • Transforming human capital development by broadening access to cost-effective, high-quality education and healthcare to improve school survival rates by 50% and increase average life expectancy by an additional two years.
        • Overcoming the economic opportunity shortfall by enhancing supply chains and access to digitally traded services to create 300,000 new earning opportunities.
        • Supporting urbanisation and governance by managing rising pressures on urban settlements by supporting the extension and delivery of critical urban services.
        • Tripling the uptake of e-government services and halving the current number of manual government processes.

      These four critical areas of opportunity cover a variety of sectors and processes that will be critical to Uganda’s ability to navigate powerful forces of change. These forces include climate change, rapid urbanisation, the youth wave, and the global dispersion of production. Building and scaling the opportunities across these zones will be instrumental in Uganda’s ability to realise structural transformation, harness the demographic transition, and mitigate emerging risks facing the global economy.

      Overall, the strategy’s vision is to create a continental 4IR hub that enables a smart and connected Ugandan society. Its mission is to transform and accelerate Uganda’s development into a creative, innovative, productive, and competitive society using 4IR technologies by 2040.

      Executing the opportunities presented in the strategy requires 4IR connectivity, regulatory agility, upskilled population, eGovernment and cyber security, resource mobilisation and investment promotion. To harness the prospects the 4IR offers, coordinated effort between the government, private sector and civil society is key.

      The strategy is now finalised and on December 8, 2022, FSD Uganda joined the Ministry of Information Technology and National Guidance to handover the National Strategy on 4IR to the Prime Minister.

      The strategy awaits approval from cabinet, although implementation of key recommendations, like the development of the National Artificial Intelligence Ethical Framework, is already underway. Furthermore, the Government and other stakeholders are making use of the opportunities presented by the strategy to roll out innovative products and services that help them meet their goals.


      World Consumer Rights Day: It’s in the Ts & Cs

      World Consumer Rights Day: It’s in the Ts & Cs

      By Anthea Paelo, PhD

      When did you last read the terms and conditions (Ts & Cs) of any digital product before clicking accept? Or review the Ts & Cs before taking up that digital loan or ordering a product off an e-commerce platform? If you are like most digital consumers, you accept the terms and conditions without reading them. As it is World Consumer Rights Day, it is a good time to consider Ts and Cs.

      With rapid technological advances in the past decade, we are very much in the digital age. In East Africa, this has been more apparent in digital financial services led by mobile money. These new technologies have increased the convenience of transactions, increased efficiency in accessing financial services and been instrumental in facilitating trade and business.

      However, the increased efficiency brought about by the digital economy has not kept up with consumer education on their rights and the risks of using digital financial services. For instance, consumers are increasingly becoming overindebted and falling prey to predatory money lenders due to the increased ease of access to digital credit. The quick access to credit over the phone has eliminated the requirement of a loan officer who might have, in normal circumstances, been able to explain to consumers the key terms and conditions of the loan they are getting, including the repayment periods and penalties.

      Additionally, due to the unsecured nature of these loans the interest rates are often higher than what would typically be experienced from traditional financial service providers. While these high-interest rates may be specified in the terms and conditions presented to the consumer before they subscribe to the products, only a few read them, and if they do, even fewer comprehend them. This may be due to desperation for money. Still, it is important to acknowledge the role of opaque and lengthy terms and conditions in limiting consumers’ understanding of the details of the products they subscribe to.

      In 2020, with support from Financial Sector Deepening Uganda, Uganda Communications Commission conducted a study on data transparency and consumer consent to understand how digital consumers engaged with the terms and conditions of digital services. A key finding from the study was that the Ts and Cs of digital service providers assessed in the market were filled with jargon that needed explanation. Additionally, these service providers did not adequately disclose information on fees or how the company would use the consumer’s data.

      The study also employed an experiment in which one group of consumers was given terms and conditions from digital service providers in their typical format. The other group was provided with a summary of the terms and conditions that listed vital elements such as the price to be paid for the data and how the company would use their data. After that, the consumers were asked questions to check their understanding. As expected, those who received a summary of the terms and conditions had higher comprehension of the products.

      The study’s key recommendation is essential for digital consumers as we observe consumer rights day this year. Digital service providers should provide consumers with a summarised version of the terms and conditions that customers can quickly

      review. With the implementation of the General Data protection Regulation, websites have adopted a summarised version of a consent form for the use of consumer data. A similar approach can be adopted for digital financial services, including price information. The summary can be disseminated using USSD (such as *130#) technology to account for most digital consumers in Uganda who use feature phones.

      Digital service providers benefit from consumers’ lack of understanding of their Ts and Cs, so a push from the regulator may be necessary to ensure implementation of the use of summarised Ts and Cs. In the meantime, before you take that loan, do you know the interest rate charged on the loan, the amount you will be expected to pay each month and the penalties of default? Read those terms and conditions.

      Photo credit: Pch vector on Freepik

      Anthea Paelo, PhD is FSD Uganda’s Intervention Manager, Business Environment


      Grassroot financial institutions receive funds to on-lend to enterprises to recover from the effects of the COVID-19 pandemic

      Grassroot financial institutions receive funds to on-lend to enterprises to recover from the effects of the COVID-19 pandemic

      Six microfinance institutions and SACCOs (Tier III and Tier IV financial institutions) have received funds to lend to enterprises recovering from the effects of the COVID-19 pandemic. This is part of a five-year Micro and Small Enterprise (MSE) Recovery Fund intervention by the Financial Sector Deepening (FSD) Uganda, in partnership with the Mastercard Foundation under the Young Africa Works initiative.

      The institutions have operations across the country and are part of the 25 institutions that are expected to reach 50,000 enterprises with loans.

      Jointly, the institutions have disbursed UGX 6.43bn to 6,738 MSEs at an average interest rate of 14.8%. So far, the fund has been disbursed to 40% of youth and 55% of women. These funds are being invested in general merchandise, agro products, agriculture, and trade among other businesses. The geographical concentration of lending is highest in the central region at UGX 3.5bn, followed by UGX 1.7bn in the western region.

      The fund aims to shorten the recovery process, from the negative effects of the COVID-19 pandemic of youth and women-owned businesses. The fund will directly secure 100,000 at-risk jobs while enabling 150,000 additional opportunities for dignified and fulfilling work for young people.

      “This is important because MSMEs are a significant driver of employment in Uganda. According to the Annual Labour Forces Survey 2018/19, more than half of the working population (65%), is employed in the informal sector. When the COVID-19 pandemic struck, Individuals and households that worked for and with MSEs were worst hit. The fund is targeting this sector and as MSEs recover from the effects of the pandemic, young Ugandans will access dignified and fulfilling work,” explains Joseph Lutwama, Director of Programs, Financial sector Deepening Uganda.

      MSEs in the program will receive credit worth between UShs100,000 and UShs10 million, which will be delivered through participating microfinance institutions and SACCOs.

      In addition to supporting MSEs, the fund will build the resilience of grassroots Financial Service Providers by digitising workflow processes and strengthening their capacity to attract more long-term institutional capital to address shocks and ensure the sustainability of systemic growth.

      The recovery fund is being implemented in partnership with ASIGMA, the facility manager, who ensures effective management of the funds. Another partner, gnuGrid Credit Reference Bureau, is providing credit referencing services to support improvements in credit information markets. MicroSave Consulting is handling the monitoring and evaluation aspects of the intervention.


      Can financial inclusion ease the back-to-school pressure?

      Can financial inclusion ease the back-to-school pressure?

      Bu Anthea Paelo, Ph.D

      At the start of this academic year, schools reported a low turn-up of students, with parents citing the lack of money to pay for school fees. Beyond school fees, students often require additional material to facilitate their attendance. For cash-strapped parents, the financial demands of the beginning of a school term are excessive. As a result, several students begin the school term late or without the necessary material to aid their studying resulting in poor performance, especially in rural schools.

      While parents are aware of the necessity for school fees months in advance, it is still a challenge for most to plan for timely payment due to low incomes. The other challenge is that even where parents have a steady source of income, they need access to financial services to help them plan, save, or access credit that would provide cash flow during the opening of the school term. Such parents could benefit from financial inclusion.

      Financial inclusion refers to the access and usage of financial services. According to the 2021 Global Findex study, 66% of Ugandan adults own a regulated deposit account, an increase from 59% in 2017. The Bank of Uganda also reports that there were over 22 million active mobile money subscribers and 235 financial access points for every 10,000 adults in Uganda, thrice the number five years ago. Uganda has thus seen significant progress in access to some financial services.

      However, there needs to be more growth in the usage of financial services and the benefits consumers derive. For instance, according to the 2021 Global Findex study, of 71% of Ugandan adults who saved money, only 39% did so using an account from a formal financial institution. Additionally, of the 75% of Ugandan adults who borrowed money in 2021, only 29% did so from a formal financial institution.

      Statistics suggest that while Ugandans require financial services such as savings and credit, which could come in handy during the back-to-school period, minority access these services from financial institutions. Likely, the type of savings and credit products available at these institutions do not cater to the specific profile and needs of a large portion of the Ugandan population. Financial service providers need to go beyond their traditional services to meet the needs of their clients by, for example, developing customised tailored services to support parents in planning, saving, and borrowing to meet their school fees demands. These financial service products should have three key features to help solve beginning-of-school term dilemmas.

      First, these products should let parents deposit money as and when they receive it, not monthly. Much of the Ugandan population are seasonal income earners, Uganda being an agricultural economy. Given the sector’s seasonality, income is only available during specific periods of the year. These periods only sometimes coincide with the opening of schools. This feature would enable parents to save their income during the harvest season when products are on sale and shore this up for periods of planting and low income.

      Second, these financial accounts should be low-cost or even zero-rated. Finscope 2018 survey data cited the high bank fees as one of the reasons Ugandans avoid formal financial institutions. Low-fee accounts would incentivise parents to open and continually deposit income as and when it is received. The frequent use of the account would help parents obtain a credit history that would form the basis for small loans to capture shortfalls at the start of the school term. Financial institutions would benefit from increased deposits and use of the services by the parents.

      Third, these financial services should be convenient. The account should be easy to open and maintain. Parents should be able to access the account through their phones and even carry out some transactions using USSD such as *130#. Deposits should be possible through various channels, such as agents. Schools could consider being agents to ease the collection and payment of fees.

      An inclusive financial sector can alleviate stress caused by the demands of the start of the school term. However, financial institutions must be prepared to develop and provide innovative financial services that meet the needs of consumers.

      Photo credit: Image by Freepik

      Anthea Paelo, PhD is the Intervention Manager, Business Environment at Financial Sector Deepening Uganda


      Testing the viability of technology platforms in the agriculture sector

      Testing the viability of technology platforms in the agriculture sector

      Agriculture is the cornerstone of the Ugandan economy and one of its most promising sectors. The sector contributes 24.1% to the gross domestic product (GDP), 33% of export earnings, and about 70% of employment based on the Uganda Bureau of Statistics (UBOS) 2021/2022 data. Regardless, Uganda’s’ agriculture productivity is only at 10-20% of its potential. This is partly, due to most farmers being smallholders who do not have access to agricultural finance needed to invest in farm productivity-enhancing technologies such as high-quality seeds, fertiliser, and irrigation.

      The share of lending of the total private sector credit to the agriculture sector in Uganda is about 12.9% according to 2019 data from the Bank of Uganda. Smallholder farmers receive a small fraction of all formal lending to agriculture since formal financial institutions prefer to lend to large agricultural companies, agricultural processors, and traders.

      This access to finance imbalance is attributed to many reasons; smallholder farmers are widely dispersed with low production capacity, no collateral, scanty records, seasonal incomes, and limited or no capacity for scale. This makes them highly susceptible to social and economic shocks and increases the risk and cost of transactions to financial institutions.

      Financial Sector Deepening Uganda (FSD) Uganda believes that the use of digital technologies can be a game changer for smallholder farmers.

      FSD Uganda believes that technologies can be used to create gains in production, efficiency, information flow, financial inclusion for marginalised groups, and transparency across segments in the agricultural value chain — all of which contribute to improved outcomes for small-scale producers.

      To increase access and utilisation of finance for the underserved market segments and unlock the agricultural sector’s potential, the Financial Sector Deepening Uganda has partnered with three technology platforms to test the viability of embracing technology platforms:

      Emata Uganda Ltd is scaling up the digitisation of cooperatives and farmer records to create alternative credit scoring to enable the provision of affordable digital loans to farmers in Uganda.

      Ensibuuko Tech Ltd is implementing a unique Fin-tech-led innovative data-driven agricultural lending based on an innovative predictive credit algorithm to expand affordable formal agricultural credit and insurance to smallholder farmers through a one-stop digital ledger platform for smallholder farmers, particularly women. Ensibuuko will also enhance the digital literacy skills of the beneficiaries to drive informed and higher uptake of financial services and digital services.

      Quest Digital Finance Ltd seeks to increase the uptake and usage of digital financial services and a wide range of bundled digital products and services to farmers & MSMEs through piloting and testing a freemium business model. The main goal of this model is to reduce the barrier to accessing the Quest Digital Finance digital ecosystem and instead monetise the transactions on the platform.

      Overall, FSD Uganda will support the three partners to develop sustainable business models, products/services, and solutions for the delivery of financial services to the unserved and underserved market segments.


      Are digital platforms a clear path out of poverty for Uganda’s smallholder farmers?

      Are digital platforms a clear path out of poverty for Uganda’s smallholder farmers?

      By Geoffrey Okidi

      John, a 50-year-old smallholder farmer in Mbale district grows maize, beans, and cassava on less than one acre of land for own consumption and sale. His farm production is affected by over reliance on traditional farming practices, use of low yielding varieties, small farm size and limited access to finance. John often sells his produce at his farm to middlemen at a low price, earning less than UShs1 million annually. John’s story is that of a typical smallholder farmer. His story represents that of 6.9 million households in Uganda according to the 2019 Uganda Annual Agricultural Survey report.

      Fortunately, this narrative stands to change if Uganda’s third National Development Plan (NDP III) 2020/21 – 2024/25 goal to increase household incomes and improve the quality of life of Ugandans is realised. The NDP III recognises that a high proportion of the population is still dependent on subsistence agriculture due to: (i) low agricultural production and productivity; (ii) poor storage infrastructure; (iii) poor market access; (iv) low value addition; (v) limited access to agricultural financial services and critical inputs.

      To solve these challenges, the government is committed to the Agro-Indutrialisation Programme, increase of ICT penetration and use of ICT services for social and economic development. But how can this commitment solve the challenges being faced by Uganda’s smallholder farmers?

      The Financial Sector Deepening Uganda believes that embracing technology platforms is one way to activate this commitment.

      The technology platform concept is fundamentally simple: create a place where producers and consumers can come together in interactions that create value for both parties using digital technology. Examples of digital platforms include Uber, Airbnb, Amazon, Jumia among others.

      There are multiple ways by which digital platforms can create gains in production, efficiency, information flow, inclusion for marginalised groups, and transparency across segments in the agricultural value chain—all of which contribute to improved outcomes for small-scale producers. Some of the potential benefits of digital platforms include:

      Market aggregation: Platforms create new efficiencies by aggregating unorganised markets. Market aggregation provides information and power to platform users who formerly engaged in interactions in a haphazard fashion, often without access to reliable or up-to-date market data. Using platforms, economies of scale can be realised when numerous dispersed smallholder farmers get organised into viable economic units or groups that are engaged in producing for the market. The 2019 Uganda Annual Agricultural Survey report revealed that only six percent of the adult household members belonged to a farmer group. To improve their incomes through collective actions, small holder farmers need to join farmer groups. Working in groups increases their bargaining power, possibilities of sharing services, assets, and infrastructure such as warehousing and processing equipment. This enhances post-harvest handling, value addition and product quality. Additionally, working in organised groups reduces the unit cost of production and delivery of services to smallholder farmers thereby increasing the possibilities of profitability and growth.

      Appropriate value and supply chain financing: Access to finance remains a limiting factor for many farmers to invest in productivity enhancements. As such, only four percent of Ugandan farmers use a full package of production enhancing technologies (a combination of fertilisers and improved seeds) and supportive services according to the NDP III. This is partly because smallholder farmers are engaged in the production of a variety of enterprises that makes it uneconomical and increases the risk for lenders. Using a market-led approach to farming, smallholder farmers should be supported to participate in one or two profitable value chains appropriate to their agro-ecological zone. This will enable them increase access to internal and external value chain financing opportunities that platform participants can proffer. To begin with, smallholder farmers should be rallied around the 10 priority commodities in NDP III namely, coffee, tea, fisheries, cocoa, cotton, vegetable oil, beef, maize, dairy and cassava. Specialisation in these commodities will facilitate the development of appropriate value and supply chain financing business models and financial solutions in the digital marketplace.

      Strong and sustainable partnerships in the platform economy: Within the digital platform, producers and consumers will be connected to each other to exchange value. For example, a platform would facilitate interactions between smallholder farmers, off takers, input suppliers, Financial Services Providers (FSPs), providers of social services, etc. Digital data from platform activities can drive increased financing to farmers, both as buyers of services and sellers of produce. The platform would also afford participants economies of scope which increases the opportunities for economic multiplier effects for the financial service providers, other economic actors, and the value chain actors. For example, FSPs can deliver financial services to different actors across the value chain thereby increasing the possibilities of revenue and profits. Platform participants would have increased access to various services across the value chain in addition to the primary economic activity. There is also increased ability to bundle services together to alleviate multiple constraints at one time. For example, platforms can easily facilitate contract farming while tying output markets to credit markets. Risk mitigation measures such as agriculture insurance and irrigation can also be bundled up with other services on the platform.

      To determine the viability of embracing technology platforms, the Financial Sector Deepening Uganda has partnered with three technology platforms – Ensibuuko Tech Ltd, Quest Digital Finance Ltd and Emata Uganda Ltd to pilot three-year programs. The programs will digitise different agricultural value chains, trade, and light manufacturing supply chains. This is with a goal to support the development of sustainable business models, products/services, and solutions for delivery of financial services to the underserved market segments. Learnings from these pilots will be shared in subsequent blogs and case studies.

      Photo credit: Image by Freepik


      Annual Report 2020 – 2022

      Annual Report 2020 – 2022

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        This FSD Uganda annual report captures our accomplishments over the financial years 2020/2021 and 2021/2022 on the journey to build an inclusive financial sector for women, youth, forcibly displaced people, smallholder farmers, and micro, small and medium enterprises (MSMEs). This report also manifests how FSD Uganda has evolved as an organisation since its establishment in 2015 and gives a glimpse into our activities for the new financial year 2022/2023.

        The two-year implementation period covered by this report happened during unprecedented times of the pandemic which came with challenges. Regardless, the FSD Uganda team in agile fashion managed to find a way to implement the organisation’s activities and went on to overperform in some indicators.

        None of our accomplishments would have been possible without the support of our donors, partners, and sector stakeholders for which we are grateful.


        Building efficient credit markets in Uganda

        Building efficient credit markets in Uganda

        By Joseph Sanjula Lutwama

        Given that the average annual savings for adult Ugandans is under Ushs 5,000, many of us will have to interface with credit at one point in our lives. This becomes more likely when it comes to running a business. Credit is a critical component of the daily operations and survival of any business because few (especially the micro, small and medium enterprises) have sufficient business savings to meet their working and long-term capital needs.

        Unfortunately, not many Ugandans or their businesses have access to credit from formal financial institutions such as banks. The most recent national surveys on the demand for financial services put that figure to about 2 out of every 10 adults in Uganda. The other 8 rely on family and friends, informal financial institutions, and money lenders to meet their credit needs. In fact, many Ugandans are not even keen to access credit from formal financial institutions. This is in part because of past experiences where their property or that of close acquaintances was liquidated by banks for failure to pay back their loans.

        From high interest rates due to risky businesses and non-performing loans to burdensome collateral requirements, the state of credit markets in Uganda is informal, opaque and makes capital extremely costly. This is not a conducive environment for business growth and keeps individuals and businesses in a perpetual vicious cycle of debt.

        Thankfully, this narrative is bound to change with the amended Credit Reference Bureau regulations issued by Bank of Uganda on September 9, 2022. Credit Reference Bureaus ensure that transparency prevails in the credit markets as they track the credit history of all borrowers to enable lenders know how they repay their loans. This enables the financial institutions adequately assess and minimise the risk of default by providing credit and safeguards commensurate to the risks of the borrower. Until the recent amendments, this service was only available to the formal banking sector that covers Tiers 1-3 (commercial banks, credit institutions and finance companies and microfinance deposit taking institutions) of Uganda’s financial system.

        The amended regulations now extend this service to the entire economy to cover both formal and informal credit providers. It also expands the scope of credit to include financial and non-financial credit. This will greatly enhance the transparency in the entire credit market enabling both suppliers and consumers in this market to have a more complete credit risk score. The new regulations will also help level the playing field for small and large lenders.

        The hope is that this enhanced transparency will reward more disciplined borrowers with increased access to credit at affordable interest rates. The other anticipated benefit is more appropriate collateral requirements given that credit reports will become their ‘reputation collateral’.

        Credit reporting by the credit reference bureaus requires digitalisation of consumer and SME finance which represents a large opportunity to expand access to finance to unserved and underserved market segments. As the provision of digital financial services rises beyond traditional banks, expanding access to data from multiple financial institutions, from traditional formal to the less formal, is more critical than ever which makes this amendment timely.

        The amended credit reference bureau regulations also pave way for a discussion about the role that the Credit Reference Bureaus Association of Uganda registered in 2021 can play in credit reporting, a fairly new concept for majority of finance sector players while ensuring financial inclusion.

        From setting up industry standards for credit reporting, to educating borrowers and lenders about credit reporting, the to do list for the association is endless. The need to setup structures for less sophisticated financial institutions and measures to protect borrowers from excess risk as well as their data prove that a lot needs to be done to improve the status of Uganda’s credit market. To tackle this uphill task, the Financial Sector Deepening Uganda is keen to play a convening role for key credit reporting stake holders to discuss and agree on how to build an efficient credit market in Uganda that includes the unserved and underserved market segments.

        Photo credit: Image by pch.vector on Freepik


        Rebooting the Manufacturing Sector Post the Covid-19 Pandemic: A Case for the Platform Economy

        Rebooting the Manufacturing Sector Post the Covid-19 Pandemic: A Case for the Platform Economy

        By Joseph Lutwama

        Taking Stock

        In the manufacturing sector, the Covid-19 pandemic came with a mixed bag of fortunes. The pandemic presented an opportunity for some industries and catastrophe for others. Industries producing accessories related to the pandemic and those producing necessities like processed foodstuffs were not severely affected as they continued to operate[1]. However, those that rely on global supply chains for their industrial inputs were severely affected as the economic lockdowns across the globe made it very difficult to easily access imports[2].

        With the pandemic on its way out, how do we build the ruins into a more resilient manufacturing sector?

        Most of the recovery initiatives have focused on short-term stimulus packages to keep the manufacturing industries afloat. However, a lot more emphasis needs to be placed on setting the right foundations that will ensure long-term sustainability and resilience to future economic shocks such as the one occasioned by the Covid-19 pandemic.

        The State of Manufacturing in Uganda

        What makes most manufacturers vulnerable to economic shocks is their size and individual production capacity that makes it difficult to adjust and adapt in the face of economic disruptions. Obwona et al[3]. in their research on the evolution of industry in Uganda note that eight out of every ten manufacturers employ less than 35 people and nearly five out of every ten employ less than 10 people.

        Most of the manufacturers are small cottage industries heavily reliant on savings and informal credit from family and friends. In cases where they can access formal credit, it is limited in tenure and amount, usually not exceeding a year or two and small amounts ranging from US$100 to US$3000. Such terms leave no wriggle room for one to undertake long-term investments to build a strong foundation to cushion against economic shocks.

        The Platform Economy: An Anti-Dote to the Vicious Cycle of Vulnerability

        So then are these manufacturers doomed to a vicious cycle of vulnerability to economic shocks? I believe the platform economy has the anti-dote to this vicious cycle of vulnerability. The platform economy harnesses the power of technology platforms to transform micro and small manufacturing entities into viable and profitable business units with the capacity to grow into medium and large business ventures. There are three building blocks of the platform economy; aggregation, a supply-chain approach and technology.

            1. Aggregation looks at the ability of technology platforms to aggregate small economic units into large collective business ventures which results into economies of scale and scope. Economies of scale in the sense that the small manufacturing entities can produce at scale what previously was unimaginable as individual units. One thousand producers of honey collectively can produce honey at scale enough to compete for the large honey markets with much higher returns on investment in both the domestic and export markets. Economies of scope make it possible for the manufacturers to receive a variety of services and products at a much lower unit cost. Some of these services are provided as a shared service across all the platform participants thereby spreading out the cost.

              A clear path to scale allows these small manufacturers to consistently grow their business savings, providing them with a solid track record to access more reliable and affordable credit from formal Financial Service Providers (FSPs). It is these financial savings and formal credit that will provide a cushion in the event of an economic shock thereby building resilience within the business.

            1. The supply chain approach facilitates and promotes specialization among small manufacturers as they can only focus on one or two products if they are to maximise returns from a particular supply chain. These small manufacturers are used to engaging in a wide variety of products and services which they keep changing from time to time. While this may be a great strategy to ensure survival as a small business, it is not attractive to formal financial institutions as it does not create a clear path to growth and long-term sustainability. It only keeps them small as they never produce a product long enough to gain mastery and specialty which are critical ingredients of growth and scale.

              Operating in formal and organized supply chains (which technology platforms provide) forces these small manufacturers to focus and organize their businesses for scale and growth as they are now required to specialize in the production of specific products. This not only increases their access to formal financing but also reduces their financing risk. Being part of a formal and well-organized supply chain reduces the individual financing risk of a small manufacturing as their overall risk is spread out across the other more financially sound large supply chain actors.

            1. Technology is the third building block of the platform economy which connects all the dots of the platform economy. It facilitates the interactions among the platform participants in ways previously unimaginable in a physical environment. Technology is more efficient and cheaper as it enables interactions and transactions across a multitude of participants in real-time which otherwise would take days or months to accomplish at a higher cost in a physical environment. Technology not only enables efficiency gains and higher productivity (all critical to achieving scale and growth) but it also increases accessibility to finance at a much lower cost.

        A Parting Shot

        Technology platforms, that can crack the puzzle of crafting the right business model, that brings together the different actors on to the platform, to harness the economic advantages highlighted above, present an immense opportunity to increase access to formal finance. These platforms are also a path to long-term sustainable growth for the manufacturing sector in Uganda – a sector that is more resilient to economic shocks, adaptable and responsive to the ever changing and disruptive domestic and global markets


        [1] accessed on 23/06/2022
        [2] ibid
        [3] accessed on 23/06/2022


        Making a Culture out of Saving Money

        Making a Culture out of Saving Money

        By Carolyne Ariokot and Brenda Banura

        In a country whose citizens’ saving culture is in its adolescence, with only 54% of Ugandan adults saving an average of UShs6,000 (2018 Finscope Report respectively), commemorating the World Savings Day provides a great opportunity to highlight why saving money is essential.

        Saving money enables you invest, put your money to work so that it generates income and appreciates. From asset accumulation to taking up investment products from fund managers, there are varied investment opportunities to choose from.

        When you save money, your credit score improves. For people who don’t have assets to use as collateral when in need of loans, saving money accumulatively will help improve your credit score because it means that you are more likely to pay back. This is why, it is common for savings and credit cooperatives to give credit whose value is twice or thrice your saving balance.

        Among other lessons, the post Covid-19 pandemic effects demonstrated the importance of saving for emergencies. Saving money enables you deal with uncertainties better and reduces your economic vulnerability.

        The 2020 Covid-19 Finscope report (which identifies and describes financial service needs and the gaps in financial service provision), showed that 57% of Ugandans would not be able to sustain their lifestyle after just one day of lockdown.  81% would not be able to sustain it after 15 days. This lack of financial preparedness is partly because of the poor saving culture.

        For some individuals especially those in the rural areas and people without steady incomes, despite the multitude of benefits, there just isn’t any money to save after spending on the basics. Therefore, as advocates of financial inclusion, the Financial Sector Deepening (FSD) Uganda has transitioned from viewing access to financial services as an end, to viewing it as an enabler. Financial services include saving, credit, payments, and insurance. The financial inclusion efforts now go beyond individuals and businesses opening bank accounts to leveraging finance services to increase productivity, incomes and employment, access to basic needs and overall economic growth.

        By leveraging finance services to increase productivity, we are supporting financial service providers such as banks, insurance companies and financial technology companies to design related products that enable people increase incomes and opportunities to access and utilise financial services such as saving money.

        To advance these efforts, in 2019, Opportunity Bank rolled out a group loan product that enabled Christine Abur, a small-scale farmer in Kiryandongo district in Northwestern Uganda rent farming land that enabled her to increase her productivity and income.

        Abur narrates her experience saying, “I have been a farmer for a long time but the harvest from my half an acre of land was just enough to feed my family. I knew that renting land in the neighborhood would enable me harvest much more so that I can sell off the excess, but I just couldn’t afford to rent extra land. In 2019, Opportunity Bank educated women in my village about their group loan product and advised us to form a group, start saving and get loans. I joined a group with which I saved Ush50,000 (about USD13) per season. I saved for three seasons and my group guaranteed me to get a loan of UShs450,000 (about USD118). I used the money to rent land, buy seeds and hire extra labour. My harvest increased and so did my income and savings. I plan to rent more land, increase my income, and save a lot more.”

        FSD Uganda shares learnings from interventions such as these with other financial service providers to serve as a benchmark to extend similar services to the wider population.

        Just like a group loan product was developed to enable Abur increase her productivity, financial service providers design or enhance their various products to enable the different categories of clients especially those at the bottom of the pyramid to access basic services such as health, education, and housing.

        Ultimately, an increase in income for individuals and businesses stimulates active participation in the financial market by transacting to meet different needs. This is bound to see an increase in the number of people saving money and the amounts being saved.

        Photo credit: Image by jcomp on Freepik


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