COVID-19 and access to agricultural finance in Uganda

COVID-19 and access to agricultural finance in Uganda

During August and September, Wellspring Development Capital and Sofala Partners conducted a “rapid diagnostic” on the impact of COVID-19 on agricultural finance in Uganda, on behalf of Financial Sector Deepening Uganda (FSDU). We consulted more than 85 experts and practitioners across the country, from those involved in farming and agro-processing, to traders and exporters, commercial banks, NBFIs, SACCOs, regulators, development partners, and more. We would like to express our sincere thanks to those who took the time to share insights with us.


The impact of Pandemics on Poverty and Financial Inclusion

The impact of Pandemics on Poverty and Financial Inclusion

By Rashmi Pillai, Executive Director.

By now, the novel Coronavirus disease (COVID-19) – is a household term. Hand sanitizer is out of stock, businesses are closing or cutting staff, and even boda-boda riders near the FSD Uganda office report possible plans to stop working and go back to the village because they aren’t earning enough to remit back to their families. The pandemic is another reminder of our global interconnectedness. It is a reminder of how an issue that is completely external can dramatically influence economies, both through on the ground effects like killing tourism, and through macro level effects like disrupting trade and weakening the currency.


Strengthening Uganda’s Economy, One Business at a Time: The Mastercard Foundation MSE Recovery Fund’s Story

Strengthening Uganda’s Economy, One Business at a Time: The Mastercard Foundation MSE Recovery Fund’s Story

By the FSD Uganda and MicroSave Consulting teams

In the heart of Uganda, the Mastercard Foundation Micro and Small Enterprise (MSE) Recovery Fund has ignited transformation, turning the tide of economic uncertainty brought by COVID-19 prolonged lockdowns into stories of hope and resilience.

Entrepreneurs like Lillian Rwambuka, 35, who runs a small retail shop in Kampala, are seeing real improvements in their lives: “I now have more stock in my business, earn more and I hope to employ someone to help me manage the increased number of clients,” she shares, beaming with pride. Thanks to a loan she acquired from a microfinance institution participating in this project, Lillian can now also pay for her children’s school fees on time, enhancing her family’s well-being and securing a brighter future.

The MSE Recovery Fund, established in response to the vulnerabilities exposed in Uganda’s financial services ecosystem during the COVID-19 pandemic, is managed by Financial Sector Deepening (FSD) Uganda, which oversees its administration and alignment with financial resilience goals. ASIGMA, as the fund manager, handles operations and liaises with participating financial institutions, ensuring effective fund deployment. gnuGrid, the Credit Reference Bureau partner, enhances lending decisions with advanced credit scoring solutions, supporting informed and secure credit extension. Microsave Consulting, as the monitoring, evaluation and learning partner, gathers actionable insights to continuously refine and scale the fund’s impact.

A Widespread Impact: From Individual to Institutional

By the end of 2023, the Recovery Fund, established in 2022, had completely disbursed its USD 22 million allocation, financing 22 microfinance and grassroots financial institutions. This support extended credit at reduced interest rates to approximately 54,000 enterprises. Remarkably, 74% of these are owned by women, and 40% by youth.

This initiative has strengthened both individual businesses and financial institutions by providing zero-cost capital, enabling these institutions to offer loans at reduced interest rates, greatly benefiting women and youth entrepreneurs. For instance, one Microfinance leveraged the fund to reduce its interest rates from 31% to 23% per annum on products targeting women and youth. Furthermore, this Microfinance partnered with the Agricultural Business Initiative and KIVA Uganda to provide individual guarantees to women entrepreneurs who lacked collateral, a move that has significantly benefited youth, women entrepreneurs, and refugees demonstrating additionality.

Enhanced governance, due to diligent oversight and technological advancements, have also improved policy implementation around whistleblowing, credit, and safeguarding. Several institutions have begun using Credit Reference Bureau services, which compile detailed credit reports and scores to aid in informed lending decisions. Some institutions have also upgraded their systems to comply with new Bank of Uganda reporting guidelines, enhancing their credit management capabilities.

Dicky Byamukama, General Manager at Lyamujungu Savings and Credit Cooperative Organisation (SACCO), highlights the benefits since adopting these services: “Previously unused by us as a tier IV institution, the integration with gnuGrid has allowed our field officers to process loans more efficiently without needing prior borrowing histories from our SACCOs.” Additionally, the organisation has strengthened its risk management and data confidentiality by introducing roles such as Risk Officer and Accountant.

These measures have streamlined credit management and bolstered the financial health of micro and small enterprises.

Building Stronger Foundations

The Fund’s success has also captured the attention of the Government of Uganda and development partners, leading to high-level engagements and strategic discussions. These include meetings with the Deputy Governor of the Bank of Uganda and his leadership and the Permanent Secretary and Secretary to the Treasury of the Ministry of Finance, Planning and Economic Development to discuss the Fund’s strategies, outcomes, and lessons learned. These interactions have among others, culminated in the drafting of the policy paper, “Blended Finance Catalyzing Financial Inclusion in Uganda.” This document outlines essential strategies to enhance financial inclusion and will serve as a guide for future initiatives, illustrating the Fund’s significant role in shaping economic policy in Uganda.

Learning from Challenges

Despite its successes, the Fund has faced some hurdles. Tier IV financial institutions (microfinance institutions and SACCOS that operate at a community level), crucial for reaching grassroots levels, struggle with robust systems (digitisation) and meeting stringent credit reporting standards. Efforts are underway to enhance their capabilities through targeted training and support, ensuring that these institutions can fully participate in the evolving financial landscape.

Another challenge lies in aligning the investment readiness of financial institutions in less economically vibrant regions, such as Eastern and Northern Uganda. The fund has responded by earmarking resources specifically for these areas, promoting equitable financial inclusion.

Lessons Learned

The journey of the Fund so far has offered valuable lessons that challenge and refine the financial sector’s practices. First, data collected reveals that micro and small borrowers, especially those businesses led by women, pose less risk than traditionally perceived. These findings challenge existing credit norms and encourage the development of more inclusive financing models.

Furthermore, the integration of credit information services within the Fund has proven crucial in minimising the risk of poor credit portfolios, highlighting the effectiveness of integrated financial services.

Lastly, the adaptability in lending practices allowed financial institutions to tailor their credit offerings to meet the specific needs of their clients. This flexibility has significantly enhanced the effectiveness of credit and underscored the need for adaptable financial products in responding to diverse market demands.

Looking Ahead

As the Fund moves into its next phase (resilience building), the focus will be on expanding its impact, leveraging lessons learned to refine approaches and ensure sustainability. It also aims to further influence and integrate its successes into national financial policies and strategies, bolstering Uganda’s overall economic resilience.


Young Africa works community of Practice on Inclusive Finance – 2023 Annual Report

Young Africa works community of Practice on Inclusive Finance – 2023 Annual Report

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    The Mastercard Foundation’s commitment to addressing youth unemployment and poverty in Africa led to the launch of the Young Africa Works strategy in Uganda. As part of this initiative, the Community of Practice on Inclusive Finance was established to foster collaboration among partner organisations in advancing financial inclusion efforts among the strategy participants. This Community of Practice serves as a platform for learning, knowledge sharing, and collective action to increase access to finance for marginalised populations, particularly youth and young women. A Steering Committee was established to guide the Community of Practice’s objectives.

    The mission of the Young Africa Works Community of Practice on Inclusive Finance is to drive inclusive economic growth and poverty reduction by promoting financial inclusion among marginalised communities in Uganda.

    Our vision is a future where all individuals, regardless of socioeconomic background, have access to affordable financial services and opportunities for economic empowerment.


    FSD Uganda – MUBS Working Paper Series

    FSD Uganda – MUBS Working Paper Series

    The Makerere University Business School Collaboration
    Special issue (May 2024, Volume I)

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      The Start of a Journey to Build a More Sustainable and Value Adding Research Ecosystem

      We were honoured as Financial Sector Deepening (FSD) Uganda to collaborate with the Makerere University Business School on this research project.

      FSD Uganda has a pro-poor financial inclusion mandate that seeks to address market systems constraints to extending formal financial services to the marginalised population segments -women, youth, persons with disabilities, forcefully displaced persons and micro, small and medium enterprises (MSMEs).

      In executing our mandate, research is a critical pillar of what we do. In the absence of sufficient knowledge and understanding of the marginalised, it is impossible to design program interventions, products, and solutions that would meet the needs of our target population.

      Considering that sustainability is one of the key tenets of our work, we have made it our mission to seek out collaborations with higher institutions of learning with core competences and experience in research, to support them in integrating financial inclusion research within their academic programs.

      The collaboration with Makerere University Business School is the first of many similar collaborations that FSD Uganda is going to pursue with other higher institutions of learning. This is with the aim of building a more sustainable and value adding research ecosystem with a focus on financial inclusion in Uganda.

      It was a pleasure working with the team. We look forward to more
      collaborations with the business school and beyond.


      FinScope Uganda 2023 Survey Findings

      FinScope Uganda 2023 Survey Findings

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        The 2023 FinScope, the fifth of its kind is implemented by the Bank of Uganda in partnership with Financial Sector Deepening Uganda, Uganda Bureau of Statistics, Abi Finance, the Ministry of Finance, Planning and Economic Development, and several other stakeholders and sheds light on various aspects of financial inclusion of Ugandans aged 16 and above.


        Empowering Women Through Unconditional Cash Transfers

        Empowering Women Through Unconditional Cash Transfers

        By Diana Akullu Wanyama and Jimmy Ebong

        What would you do with an extra Ushs200,000 (USD 53) in your pocket? Would you load up on groceries, top up on that pending payment for school fees, or pay back that small loan you obtained last month? For many women in low-income countries, including Uganda, that extra cash potentially allows them to go beyond simply meeting their basic needs to starting new economic activities or reinvesting and growing the existing ones. It can mean the difference between having enough to consume or sufficient to consume, save, and invest.

        This year’s International Women’s Day 2024 theme is “Invest in Women: Accelerate Progress”. The subject is particularly relevant for Uganda, where women make up more than half of the population, 46% of whom constitute Uganda’s labour force but for whom the median monthly wage is UShs130,000 less than that of men. Women are primarily engaged in the informal sectors where their earnings, job quality, and security lag that of their male counterparts. For instance, although 70% of Ugandan women are employed in the agricultural industry, they own less than 20% of the sector’s output. Low earnings render women’s livelihoods and households highly vulnerable and economically constrained especially during emergencies.

        There is growing evidence from research that backs the use of cash transfers as a tool to alleviate poverty and increase women’s economic empowerment. Cash transfers are cash disbursements made without rules or conditions for use. Well-thought-out cash transfer programmes are crucial because they enable beneficiaries to meet basic needs, access essential services such as healthcare, or invest in income-generating activities.  Studies have drawn a path between the increased ability to meet crucial needs and increased self-confidence, self-efficacy, and financial autonomy in women, leading to empowerment.

        In 2023, the Financial Sector Deepening Uganda, in partnership with TradeMark Africa and 100WEEKS, participated in an initiative to provide informal cross-border women traders at the Elegu border town with unconditional cash transfers alongside training in business and entrepreneurship. The project aimed at offering relief to women cross-border traders whose trade suffered due to the closure of borders and nationwide lockdowns at the height of the COVID-19 pandemic and lost their businesses and incomes. Relief in form of a cash transfer was disbursed to just over 500 women in three instalments. Each woman received a total of Ushs571,658 (USD153). The women also could voluntarily attend any of the three financial literacy trainings provided.

        While short-term, the project resulted in some positive gains. The cash transfers enabled the women to access basic needs, including food, school fees, and medical services. Annet Katushabe, a wholesale trader at Elegu town, attests to this benefit: “When I received the money, my children were on the verge of being chased from school due to outstanding fee balances. I paid half of the amount for their school fees. I utilised the remainder of the money to buy pesticides for my garden, where I plant crops for sale. I also bought a rooster to add my existing flock of chickens and saved some money.”

        Irene Adong, another cross-border trader dealing in cereals, and legumes, reported; “I used the money to increase the stock of items I sell so that I have most of the items my customers ask for. My income has increased so much that I can save up to Ushs150,000 (USD 40) a week. This is a big increase from the Ushs20,000 (5 USD) I used to save weekly”.

        Women already engaged in entrepreneurship were more likely to use the cash to diversify their economic activities or expand their businesses. Interestingly, on average, 40% of the women attended the three trainings despite its non-mandatory nature. The cash likely increased their access to basic needs, reducing survival stress and opening them up to capacity-building opportunities.

        A key challenge was that over 80% of the women did not have a national ID card or a mobile money account in their names. They had to recruit a sponsor to receive the money on their behalf. A national identity document is increasingly necessary to access government and financial services. To close the gender gap and increase women’s economic empowerment, targeted interventions are still needed to ensure that every Ugandan, including those outside urban areas, has access to a national identity card.

        In conclusion, unconditional cash transfers are a valuable tool to improve women’s livelihoods, productivity, and empowerment. The transfers enhance access to basic needs, reduce their survival stress, opens them up to learning opportunities, and enables them to save and invest. A small investment can mean the difference between earning enough to consume and enough to consume, save, and invest. Policymakers and development practitioners should consider cash transfers as one of the tools they can deploy to alleviate poverty and advance women’s economic empowerment, even as they consider cultural and social contexts for implementation.


        Measuring Women Financial Inclusion Toolkit for Uganda

        Measuring Women Financial Inclusion Toolkit for Uganda

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          The gender gap in account ownership has significantly narrowed in Uganda. In 2021, approximately 65% of women had an account at a formal financial institution or a mobile money account, compared to 67% of men, according to Findex data. It positions Uganda as one of the countries with the lowest gender gaps in Africa. However, despite this progress, significant disparities in account usage persist. For example, women are more likely than men to rely on informal institutions for savings and borrowings.

          Several gender-specific barriers contribute to this situation, including prevailing gender norms, limited access to and control over economic resources, lack of knowledge, geographical and technological constraints, and stringent loan requirements. Reliable and comprehensive gender data is needed to gain in-depth understanding of gender disparities, inform policy and program development and monitor progress, better address the women segment as customers and support advocacy for gender equality.

          This toolkit aims at providing practical tips to measure women financial inclusion in Uganda using a four-fold approach


          Fostering Inclusivity: Mainstreaming Gender in Uganda’s National Financial Inclusion Strategy (2023-2028)

          Fostering Inclusivity: Mainstreaming Gender in Uganda’s National Financial Inclusion Strategy (2023-2028)

          By Anthea Paelo, Ph.D.

          The 2021 Global Findex Study places the gender gap in financial inclusion in Uganda at only two percentage points. The gap is even smaller for mobile money at only one percentage point. Uganda is, in fact, one of the few countries in sub-Saharan Africa where the gender gap is below five percentage points.1 Additionally, a comparative analysis of the Findex surveys between 2011 and 2021 for East Africa reveals that Uganda has the smallest gap in terms of active usage, at 5%, compared to Kenya’s 10% and Tanzania’s 31%. By these measures, Uganda’s financial sector is performing incredibly well in its gender mainstreaming targets.

          But has Uganda solved the gender gap in financial inclusion? To answer this question, we need to look further into the available data. In April 2023, FSD Uganda commissioned a study that sought to comprehensively assess women’s financial inclusion in Uganda to inform the development of the National Financial Inclusion Strategy (2023-2028) (NFIS II). The study found that a closer examination of available financial sector data revealed a persistent gender gap in access and usage of financial services. For instance, if we exclude mobile money accounts, only 34% of women own an account at a bank or a non-bank financial institution.

          In terms of usage, women are more inclined to use informal savings options such as savings clubs. These savings clubs are often unregulated and are prone to security issues over and above the lack of privacy associated with their usage. Similarly, women are less likely to borrow from banks and other formal financial services, leaving them vulnerable to theft and scams in the community. In terms of women-owned businesses, the Uganda Bankers’ Association reports that only 24.4% of the industry loan book is extended to women’s initiatives and enterprises. The pattern is replicated in the insurance industry, where 57% of the informally insured and 52% of the uninsured are women.

          Undoubtedly, Uganda has made significant headway in closing the gap in some areas of financial inclusion, particularly in enabling women to access financial services through a bank or mobile money. However, some barriers still hinder their ability to use and enjoy quality financial services. Social and economic barriers such as discrimination, limited access to education and training, lack of collateral, little legal protection, weak financial infrastructure, and limited digital literacy are some of the few examples recognised and raised in NFIS II.

          Why does Women’s Financial Inclusion matter?

          The goal of Uganda’s National Development Plan III (2021/21 – 2024/5) is to increase average household incomes and improve the quality of life of Ugandans. Financial inclusion is an essential enabler for achieving the NDP III by improving cashflow management, increasing resilience in the face of shocks and enabling the growth of businesses that increase income and create jobs.

          Women’s financial inclusion matters because it reduces the exposure of poor and rural households to income shocks, supports growth and increases household resilience. It can contribute to increased investment in health, education and human capital. The focus on Women’s Financial Inclusion, including its accurate measurement, matters because it creates a route to reduced poverty and increased well-being of all Ugandans.

          What is being done?

          The National Financial Inclusion Strategy (2023 – 2028) (NFIS II) has as one of its key pillars, the objective to promote gender-inclusive finance. In the private sector, the Uganda Bankers Association in October 2023 launched its Women Economic Empowerment Initiative to address the challenges that hinder women’s progress in the banking sector and businesses. It appears that public and private stakeholders believe that more needs to be done to support women in the financial sector.

          To address the social and economic challenges, NFIS II proposes three key initiatives. The first initiative involves the provision of gender-inclusive financial and digital literacy. While a Financial Literacy Strategy already exists alongside various programmes, the strategy advocates that women be mainly targeted and that these programmes recognise barriers that affect women, such as lack of confidence, remote locations, and preference for peer learning, such as through savings groups. A recent study by the FSD Network, in partnership with FSD Uganda, found that women are more likely to take up new digital credit products if their peers recommend them rather than through agents. Another study by FSD Uganda found that women were more likely to take up a savings offering following numerous sessions with a sales agent to understand the product.

          The second initiative is to increase and improve the access and affordability of gender-responsive financial services. Previous studies have cited the high cost of financial services as a barrier to increased account usage. The barrier is usually higher for women who often have lower incomes.

          A third initiative revolves around creating a supportive social context and regulatory environment. High on the agenda for this initiative is to mobilise financial institutions to collect sex-disaggregated data to enhance gender-inclusive policy and decision-making. The value of sex-disaggregated data is that it would provide a clearer, more accurate picture of women’s financial inclusion, enable regulators to accurately track the changes over time and support the development of appropriate products and services. To support this initiative, FSD Uganda commissioned Altai Consulting to develop a toolkit to support the industry in collecting, analysing, and measuring gender-inclusive financial inclusion indicators.

          The Value of Gender Inclusive Data

          While the goal of increasing women’s financial inclusion is irrefutable, the path can be challenging to define. A quick win is for stakeholders, including regulators, supervisors, financial service providers, and fintechs, to take up the call to ensure that sex-disaggregated information and data are collected. Understanding the status quo and measuring progress is a crucial first step to increasing access to and usage of financial services for women. It is for this reason that FSD Uganda developed a Gender Mainstreaming Toolkit for financial inclusion indicators. In accomplishing this, we can hopefully achieve the vision set out by NFIS II of universal access and usage of a broad range of quality and affordable formal financial products and services for Ugandans, delivered responsibly and sustainably.


          Mainstreaming Gender in the National Financial Inclusion Strategy 2023-2028

          Mainstreaming Gender in the National Financial Inclusion Strategy 2023-2028

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            As the Bank of Uganda develops the National Financial Inclusion Strategy II 2023 – 2028 this report aims to provide an overview of the status of women’s financial inclusion in Uganda and propose recommendations. In Uganda, the gender gap in access to financial services is lower than in most sub-Saharan African countries. This gap also appears to have narrowed in recent years.

            However, differences in usage persist, with women using more informal services. Women financial inclusion encompasses very different realities depending on the socio-economic characteristics of individuals. Indeed, the gender gap is more pronounced among poor, rural, and least educated individuals. The barriers that women encounterin accessing financial services are thus diverse.

            Gender norms are deeply entrenched in society and condition all women’s activities, particularly their financial inclusion. Moreover, women lack access to and control over economic resources. The price of financial products is often perceived as a major obstacle to women financial inclusion. Finally, some regulations in place, such as the
            need for collateral and KYC regulation, also impede women’s access to financial services.


            Memorandum of Understanding (MoU) Signing for a New Era of Credit Information Market Collaboration in Uganda

            Memorandum of Understanding (MoU) Signing for a New Era of Credit Information Market Collaboration in Uganda

            February 1, 2024, Kampala, Uganda: The Credit Reference Bureau Association (CRBA) and Financial Sector Deepening (FSD) Uganda will today sign a Memorandum of Understanding (MoU), which formalises the intent between the institutions to collaboratively implement strategic initiatives to develop an inclusive, efficient, and well-functioning credit information market in Uganda.

            The collaboration follows the issuance of the Financial Institutions (Credit Reference Bureau) Regulations in 2005 (later revised in 2022) that introduced the use and exchange of credit information among different lenders, and set industry standards for credit information reporting sharing and usage. With this background, the Association seeks among other matters to support the credit information reporting mechanism and structures; provide financial, credit referencing operations, and data protection education for, Credit Reference Bureaus (CRBs), borrowers and lenders, and develop measures to protect against the risks of borrowing and CRB operations.

            The CRB industry in Uganda is relatively young and thus faces several challenges, including data quality and privacy concerns, credit reporting duplication, and the need for increased consumer awareness. Nonetheless, the industry, and the Association in particular, has a vital role in facilitating access to affordable credit for individuals and businesses in Uganda.

            “The new CRB regulations have opened the credit information reporting and referencing space, enabling other lenders to join the credit information reporting mechanism. The value that the Credit Reference Bureaus Association brings is in creating a single body and voice through which diverse stakeholders can collaboratively design standards and structures that allow efficient exchange and usage of information in the credit reporting regime,” explains Barbra Among Arinda, the Executive Director of CRBA.

            The MoU between the CRBA and FSD Uganda outlines three key areas of cooperation:

              1. Collaboration, stakeholder engagements, exchange of information, and sharing of best practices, all in pursuit of mutual objectives.
              2. Facilitating the development of a robust credit information-sharing market and sound credit reporting frameworks.
              3. Strengthening shared credit market infrastructure and risk management.

            “Financial Sector Deepening Uganda recognises the significant role credit reporting plays in enabling access to affordable credit to individuals and MSMEs. As such, we are excited to support the CRBA’s efforts to implement initiatives that create an enabling regulatory environment for efficient and robust credit information sharing. The MoU signifies a mutual commitment to fostering innovation, sharing resources, and addressing common challenges in the credit information industry,’’ says Patrick Oketa, Executive Director, FSD Uganda.

            Note to the editor

            About CRBA

            The Credit Reference Bureau Association (CRBA) is a company limited by guarantee registered in 2021. The CRBA represents the interests of credit reference bureaus in Uganda in policy and regulatory matters relating to their core business. It aims to create a framework for standards and policies that protect consumer credit information in Uganda, promote the effective management of credit data in Uganda through information and financial education, uphold the nature and quality of information recorded, stored and reported and support the sustainability of the credit industry. Currently, the CRBA has three members: Metropol, CreditInfo and gnuGrid.

            About FSD Uganda

            Financial Sector Deepening (FSD) Uganda is the country’s leading ‘think and do tank’ on financial inclusion and inclusive financial market development. FSD Uganda is an independent not-for-profit company committed to promoting greater access to financial services. FSD Uganda seeks to develop a more inclusive financial sector with a focus on low-income individuals. We support innovation, conduct research, and support regulatory processes that shape the financial sector. The organisation is funded by the Bill & Melinda Gates Foundation, the European Union, and the Mastercard Foundation.

            For more information, please contact:

            Barbra Among Arinda, Executive Director, CRBA via or +256 782684258

            Brenda Banura, Communication Lead, FSD Uganda via or +256 704818607



            Leveraging Technology to Increase Access to Rural Agricultural Credit Finance: The Case of Emata

            Leveraging Technology to Increase Access to Rural Agricultural Credit Finance: The Case of Emata

            By Douglas Karugonjo, Joseph Sanjula Lutwama and Maren Hald Bjørgum

            The State of Rural Agricultural Credit Finance

            Agriculture in Uganda especially in the rural areas has always faced the challenge of limited access to credit finance. As of the end of March 2023, the agricultural sector accounted for 11 percent1 of the commercial bank credit to the private sector despite accounting for the highest proportion of Uganda’s labour force at 35.9 percent2. Most of this limited funding is allocated to commercial large-scale agricultural production, processing, and trade with the least going towards small-holder farm production which dominates the rural areas.

            Given its predominantly informal nature with heavy reliance on rudimentary agronomical practices, formal financial institutions are hesitant to advance credit to small-holder farm production. First and foremost, these farmers are in far to reach remote areas making it costly to serve this market segment. Additionally, the potential return on investment from this market segment is very low considering the informal nature of their farm production units. Their production levels are highly unpredictable and susceptible to adverse weather patterns and fluctuating market prices. Combined, these factors make this market segment risky and barely profitable.

            The Promise of Technology

            Despite all the disadvantages associated with small-holder farming, technology presents a unique opportunity that could turn this market segment into a viable and profitable business opportunity for formal financial service providers.

            In 2019, the Financial Sector Deepening (FSD) Uganda partnered with Laboremous Uganda Limited to pilot its technology platform Emata in delivering affordable and easily accessible credit to dairy small-holder farmers in Central and Western Uganda. The partnership was focused on digitising farmer records and creating credit scores that could help farmers access credit. FSD Uganda also provided technical assistance towards a human-centred approach to product design for the loan origination and repayment process on the Emata platform. After a successful pilot, Emata was officially registered as a company in March 2020. It received its lending license in December 2020 and started lending in February 2021.

            Emata meets the need for agricultural financing by providing affordable digital loans to farmers that are three to six times more affordable than informal loans that smallholder farmers use today. Emata achieves this by digitising the entire process and servicing farmers via partnerships. The Emata model effectively solves the challenges that formal financial institutions face when financing farmers regarding manual processes, last mile distribution, and the need for collateral.

            Whereas banks largely rely on manual processes, Emata automated the entire process from data collection, credit processing, to loan disbursement. This high level of digitisation brings many advantages. First and foremost, it reduces the costs of processing a loan. This enables Emata to provide small loans that are suitable for smallholder farmers. The high level of digitisation also makes Emata’s lending decision instant. This means farmers no longer have to wait for months before they know if they will have the funds, they require to make critical and often time-bound investments.

            The Emata model effectively addresses the issue of last mile distribution. Emata loans are requested through WhatsApp, by using an automated chatbot. WhatsApp is widely popular in Africa, very data efficient, and eliminates the need to install a separate app. Farmers without WhatsApp can use the smartphone at their dairy cooperative. This allows Emata to reach even the most remote farmers without a smartphone.

            Emata reduces the need for collateral by building its credit decisions on data science. Emata uses the patterns of the farmers’ production data, weather data, and satellite data to determine how much a farmer produces, if a farmer is reliable, and ultimately lendable. This data science driven approach allows for better decision-making that reduces the risk and thus the need for collateral. This allows Emata to service all farmers, regardless of whether they are men, women, or youth – and not just the large-scale professional farmers with collateral.

            How the Emata platform works

            Rather than going to each farmer individually, which would be costly, Emata partners with cooperatives and comparable organisations. The Emata process can be broken down into three steps. First, Emata provides software to partners to digitise their operations via a user-friendly Management Information System (the Emata “MIS”). The Emata MIS unravels administrative clutter, increases transparency, and allows cooperatives to make data-driven decisions.

            Second, Emata covers the data collected via the MIS and 3rd party weather and satellite data into credit limits tailored to each farmer. Emata achieves this by using algorithms that forecast production, income, and cash available to repay the Emata loan.

            Lastly, Emata provides digital loans that farmers request through a WhatsApp chatbot. Loans are disbursed via mobile money or to input suppliers.

            The Impact in numbers 

            Between August 2019 and July 2022, a total of 56 dairy cooperatives signed up on the platform with 57 percent active. Over 9,000 farmers were active on the platform with digitised agricultural production records. 80 percent of these were in the dairy sector, with the remainder divided between the oil seeds, maize, and coffee sectors.

            During that period, a total of 1,464 loans were advanced to farmers with the dairy sector accounting for the bulk (85 percent) of the credit disbursed. The Emata  platform also provided competitive interest rates that are multiples lower than the market range of 10 percent to 20 percent per month.

            The Emata platform also registered good performance about the credit portfolio health of the farmers especially the dairy farmers, with a default rate below 1% and PAR-30 below 5%. This is a clear testament to the value of technology in reducing the risk profile of the small-holder farmer.

            From Small-Holder Financing to Unlocking Ecosystem Financing Opportunities

            Overall, the Emata platform has transformed the dairy ecosystem beyond increasing access to agricultural finance for the small-holder dairy farmers to opening potential financing opportunities for other dairy ecosystem actors. The dairy cooperatives benefit from the free-of-charge administrative platform of Emata which resolves the burden of manual record keeping and reduces the time spent preparing semi-monthly payments to farmers from four days to a few clicks. Entering records on the Emata platform is cost and timesaving for the cooperatives thereby boosting operational efficiency and profitability. Moreover, membership and milk deliveries are boosted as access to affordable credit becomes a key reason for farmers to join a cooperative.

            A Catalyst for Economic Empowerment

            Given that the dairy sector is one of the fastest growing export sectors in Uganda yielding 2.08 billion litres of milk, the highest in East Africa, Emata presents an immense economic empowerment opportunity for the small-holder dairy farmers. Given the easy access to credit financing, smallholder farmers can now take advantage of these immense economic opportunities in Uganda’s dairy sector.


            Rapid Assessment of the Feasibility of a National Long-term Savings Scheme

            Rapid Assessment of the Feasibility of a National Long-term Savings Scheme

            Summary report

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              Detailed report

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                Uganda’s informal sector has shown a wealth of unrealised entrepreneurial potential. It ranked the third highest in (Global Entrepreneurship Monitor, 2014) due to 28% of adults owning or co-owning a new business. Though, the study did also reveal that Uganda had some of the highest rates of business discontinuation in the world.

                Mobilizing savings is crucial for the welfare of Uganda’s informal sector workers. It offers advantages like capital accumulation, funding for productive investments in human and business capital, fostering enterprise growth, providing insurance against risks, and enhancing financial stability and livelihoods for households.

                The informal sector in Uganda is not oblivious to the importance of saving. In the 2023 survey, it was uncovered that respondents actively saved for rainy days such as if they become incapacitated from work, face illnesses or other family emergencies that require financial aid. Despite the active saving behaviour and awareness of the importance of saving among individuals in the informal sector, there is still low adoption of long-term/retirement schemes. The National Financial Inclusion Strategy 2023 – 2027 (NFIS II) (NFIS, 2023) highlighted that Uganda’s retirement sector predominantly targets individuals who are formally employed, largely excluding the informal sector. When combined with the fact that they face uncertain employment and income, their exclusion from long-term/retirement schemes makes them more susceptible to poverty.


                FSD Uganda’s engagement with fintechs

                FSD Uganda’s engagement with fintechs

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                  FSD Uganda acknowledges that technology presents unique financial inclusion opportunities for the economically disadvantaged. Because technology comes with affordability and efficiency which play a huge role in increasing financial inclusion, FSD Uganda incorporates the use of technology in all programme implementation. Technology makes it affordable to reach the unbanked and under-served in remote rural areas efficiently in addition to smoothening the value and supply chain. Additionally, technology makes it possible to capture data whose insights can be used to design appropriate products.

                  To reap these benefits, it was important that the fintech space is formalised. The establishment of the Financial Technologies Service Providers Association (FITSPA) was a key step in this.


                  Empowering Micro, Small, and Medium Enterprises: The Influence of Microfinance Group Lending

                  Empowering Micro, Small, and Medium Enterprises: The Influence of Microfinance Group Lending

                  By the MicroSave Consulting and FSD Uganda teams

                  Across the globe, the lack of collateral is a primary barrier that economically excludes individuals notably young people especially women from accessing formal banking services. To get around this obstacle, the underserved population has resorted to establishing informal community-based financial systems to fulfill their financial requirements. These alternative arrangements, such as Village Savings and Loans Associations, Rotating Savings and Credit Associations, and Table Banking, have emerged as a means for the marginalised to access the financial resources they lack from traditional banking institutions. To extend financial services to the underbanked and unbanked, formal financial institutions have emulated and adopted some of the positive practices in the informal financial systems.

                  Informal or formal, financial institutions that offer loans use one of two approaches, individual or group lending. This is the same with the Tier III and IV financial institutions that are on-lending under the Mastercard Foundation Micro and Small Enterprises (MSE) Recovery Fund, a five-year program implemented in partnership with the Financial Sector Deepening Uganda. This initiative was launched in February 2022 and is under the Young Africa Works strategy, which seeks to facilitate direct access to finance 50,000 MSEs (at least 40% women, 30% youth). Designed during the aftermath of the COVID-19 pandemic, this revolving fund provides concessional capital to participating financial institutions for onward lending to micro, small, and medium enterprises negatively impacted at a reduced borrowing rate. The participating financial institutions follow their in-house credit processes to assess the enterprises given their needs.

                  Group lending vs individual lending

                  The Fund is working with both Tier 3 and Tier 4 financial institutions. Based on the data so far, one Tier 3 Microfinance institution has effectively employed the group lending methodology for a broader client outreach. Since the Fund’s commencement (just under two years), over 26,000 MSEs have successfully accessed credit, and 60% of this has been disbursed by the Microfinance, a testament to its distinctive strategy. The Microfinance has disbursed UGX 7 billion to 16,166 majority of them youth and women-led enterprises within 12 months. Conversely, two SACCOs that employ an individual lending approach, have managed to extend credit to 842 and 503 enterprises and disbursed UShs 3.4 billion and UShs 2.25 billion respectively within 12 months.

                  For both approaches, the critical difference is in the collateral criteria. With group lending, all that’s needed is a group guarantee, unlike individual lending products that demand traditional collateral. The Microfinance’s group methodology

                  explores unique features that have positively impacted young people, especially women, and offers lessons for other financial institutions: Here is what makes this institution’s group lending approach work.

                  How the Mircofinance’s group lending approach works

                  Central to the approach is that the institution has dealt with the access to finance obstacle created by the need for traditional collateral. To do this, the institution employs the segmented and combined group strategy, coupled with the delegation of credit approval authority to group members.

                  To implement this, the Microfinance employs a two-fold group methodology: branch-based and community-based groups. The former gathers at the bank, while the latter convenes locally, delivering tailored flexibility to diverse client needs.

                  The institution looks out for people organised in groups and creates sub-groups of six to seven members to whom loans are exclusively accessible. These sub-groups operate like well-coordinated “cabinets,” complete with designated leaders. This structure not only encourages governance but also strengthens bonds among members. The institution’s loan officers play a modest role in the lending process. Group members collectively greenlight loans without the intervention of the bank. This empowers the groups, enabling them to take charge of credit underwriting, member selection, and loan recovery. This proactive approach ensures that disbursed amounts grow, and the quality of loans improves over time.

                  Once the groups have been formed, members of branch-based groups can access loans up to UShs 5 million per member without the need for collateral. On the other hand, community-based groups can borrow up to UShs 3 million per member, securing approvals at the group level—an embodiment of the Microfinace’s dedication to client empowerment. For more substantial loan amounts, up to UShs 30 million, collateral is a requisite to manage potential risks. This balanced approach ensures that prudent risk mitigation measures are also upheld while empowering clients

                  A client’s story

                  Emily a 28-year-old tailor in Bukoto whose business was adversely affected by the Covid-19 pandemic is one of the Microfinance’s clients served under the group ledning model. Her faulty manual sewing machine didn’t help matters as it affected her output’s quality, efficiency, and income so much that she could hardly meet her daily basic needs. “Things changed when through my savings group which banks with the Microfinance, I received a loan of UGX 800,000 and bought an electric sewing machine,” she says.

                  The tailor is now efficient, and her turnaround time has been reduced from three hours to one hour for some jobs. “This has helped me regain my client’s confidence and also get new clients. I now make at least UGX 15,000 daily and I can meet all my basic needs. This wasn’t the case before when I made no money on many days and had to skip some meals and move in with a relative because I couldn’t afford rent. Because of the increased volume of work, Emily is planning to employ one other person to support her.

                  As a result, this dynamic formula has enabled the bank to extend credit to a broader spectrum of customers, especially women and youth who lack conventional collateral. Given that women are more likely to belong to groups, the group lending approach is one that financial institutions from Tier 1 to IV should learn from and integrate in order to reach young people, especially women


                  Seven lessons from the academic-industry collaboration pilots in Uganda

                  Seven lessons from the academic-industry collaboration pilots in Uganda

                  By Jackie Kitiibwa

                  “What good is engineering research with no practical relevance?” reads a post on Quora from a seemingly frustrated PhD student. The student laments that a sizable portion of the research conducted at their university seems to have limited or no real-world application. “Many of these papers seem to be published just for the sake of it,” they added. Often, the response to such sentiments is, “You never know when seemingly irrelevant research will become relevant.”

                  In the past few years, recognition of the need to make academia more relevant or suited to meet world problems has grown. This has led to increased interest in academic-industry collaboration (AIC). Despite the consensus on the importance of the AIC to firms, academia, and the economy, many institutions are at times reluctant to implement long-term collaborative frameworks. In cases where collaborations happen, the success and outcomes of these partnerships differ significantly.

                  There has hardly been research on academia and industry collaborations in Uganda, especially in the financial sector. To gain insights and support knowledge building in this area, FSD Uganda instigated a pilot of research collaborations between universities and industry associations. The initiative was conceptualised following an in-depth capacity needs assessment for financial sector industry associations. The needs assessment identified limited research skills as a significant capacity gap that limits industry associations from performing their advocacy and market facilitation roles effectively. Industry associations are unable to effectively contribute to policy formulation because of a lack of data or fail to convince policymakers towards change because of a lack of convincing evidence. Without sufficient, proven, believable, and triangulated data no headway can be made.

                  FSD Uganda recognises the important role that financial sector industry associations play in promoting responsible financial inclusion within their respective environments. To this end, we support the industry associations to build their institutional capacity to support and promote financial inclusion. Our focus has been on building evidence-based advocacy that can help in better policy and decision-making. We also want to empower the associations to be sustainable. This way they will be able to advocate for their members’ interests with limited dependency on donor partners or consultants.

                  To achieve this, each industry association was paired with an academic institution to collaborate on a topic of research that would be relevant to their respective sector clients[1]. Academic-industry collaboration is a powerful tool that promises three outcomes:

                    • First, a collaboration between associations and academia is a creative and cost-effective approach that ensures that there is sustainable knowledge transfer between practitioners and researchers.
                    • Secondly, such partnerships will go a long way to motivate researchers/academia to take all possible steps to collaborate with practitioners to apply what is discovered in research and could get researchers into new and interesting areas.
                    • Thirdly, this approach could reorient the incentives for academicians and help achieve a better balance between conducting research and ensuring that it positively changes practice and resource allocation. This would allow academia to increase its relevance in developing solutions that can be used to solve real-world problems.

                  Lessons from the pilot project

                  1. Include AIC in the organisation’s overall strategy – AICs are resource-intensive and need significant commitment from management and staff in terms of time, funding, and human resources. Most of the projects were significantly delayed because team members were not readily available due to other commitments at work. This was common in the early stages of the projects. Staff from the different institutions were still expected to perform their daily duties while also committed to the project. Concerted efforts from the FSD Uganda team were needed to convince the institution management of the importance of the pilot and to avail resources for the teams to work effectively. It is important that such activities are included in the strategy with earmarked work plans, and sufficient funding attached to them.
                  2. Develop a research agenda – As would have been expected, institutions that had a structured and well-defined research agenda moved faster. Some institutions did not proceed with the research because of a lack of funds, or no operational structures to advance the work. For institutions that did not have clear research plans, considerable time and multiple back-and-forth was needed to get partners aligned on the research topics or objectives. Sometimes these had to be changed or tweaked following governance changes within an organisation. Once the funding was available, these were quick to move ahead. Market facilitators and funders should consider supporting institutions to put in place a robust research agenda before such partnerships are formed.
                  3. Pre-collaboration preparation and training – For AIC partnerships, the need for rigorous preparation and training is crucial. While the inception of the project included training on research skills it became evident during the implementation of the project that training on other softer skills like how to handle partnerships, negotiation skills, communication, and project management were equally and, in some cases, more essential. On the flip side, while some teams found the inception research training basic, teams that were relatively new to research struggled to comprehend the concepts. A pre-training needs assessment is therefore imperative to understand gaps and customise the training accordingly.
                  4. Choosing the right partner – Expectedly, partners who had worked together before were able to move faster than those with no partnership history. Surprisingly, in one of the collaborations, project activities progressed well even without prior collaboration amongst the team largely due to the strong engagement of the project leader and good team composition. Having a strong project leader with great stakeholder management skills was the key success driver for such collaborations.
                  5. Funding – Outlining and emphasising the purpose of the funding for the research was important for both industry and academic teams. There was a notion that the funding was intended as professional fees for a consultancy. This brought about misalignment in expectations with some teams dissatisfied with the meagre stipend provided for the research activities. As a facilitator, FSD Uganda envisaged that the payout was meant to offset some of the costs and facilitate smaller expenses for the research. The expectation was that participant institutions would provide additional funding to support the project. However, it is important to note that most institutions had not budgeted for this project, and it was, justifiably, challenging to mobilise the funds. FSD Uganda also wanted to test if such collaborations would help limit the need for local industry players to hire expensive consultants.
                  6. Roles and responsibilities – It is critical to articulate the roles and responsibilities of the institutions and the team members. For each of the partnerships, the roles and responsibilities were different. Some viewed the academic and industry as equal partners. But while they worked together to develop the instruments and define the scope of work and research sample – each undertook the survey work independently. Other collaborations involved the academic teams conducting the research while the association reviewed the tools and reports and provided comments. These two approaches were not considered ideal as we realised it limited knowledge transfer for academia to learn from industry and vice versa. A better model was the academic team working closely with the industry, handholding them where necessary through the process. This collaboration resulted in marked knowledge transfer and there was a lot of growth evidenced by the team members.
                  7. Collaboration Agreements – Each collaboration had different partnership arrangements. This was caused by many factors some of which included – the institution’s internal policies and processes, and whether there was an existing collaboration arrangement between the two institutions. FSD Uganda’s internal agreements also played a part in providing a framework from which these agreements were drawn. For collaborations that existed before, the partners decided on how the research funds would be split amongst themselves. Despite such arrangements, there were some disagreements in cost-sharing among some partners.

                  Academic–industry collaborations present a cost-effective and practical approach that strengthens the growth of knowledge and provides for practical relevance to real – world problems.  More such collaborations should be encouraged and supported.

                  [1] Links to the three studies
                  Agent Banking Services in Western Uganda,
                  Effect of Covid-19 on saving groups,
                  Microinsurance needs for informal traders.


                  What does it take to make digital credit gender inclusive?

                  What does it take to make digital credit gender inclusive?

                    Download Report

                    Digital lending is expanding rapidly across markets with significant mobile money or mobile banking penetration. And as with all financial services, access and utilization patterns differ by gender. Some digital lending may have the potential to overcome gender biases. For example, borrowers can request a loan from anywhere, avoiding some transaction costs that are particularly burdensome for women. It can standardize processes to avoid the human biases of loan officers. Lenders can work around gender biases stemming from the use of titled land as collateral by assessing creditworthiness on alternative data sources such as cash flows.

                    But digital lending can still suffer from inequities. Women may have less access to smart phones, run smaller businesses deemed ‘unworthy’ by some lender, or lack certain forms of KYC required for applications. They may be more likely to struggle navigating a smartphone app on their own. And if the product itself wasn’t designed with women in mind, it may be a poor fit for their borrowing needs.

                    How can digital lenders be conscious of the range of gender issues that might be at work and adapt their practices to be attractive and useful for women? FSD Uganda and the FSD Network Gender Collaborative Programme explored these issues through a partnership with a digital lender in Uganda from 2021-2023. FSD Uganda was simultaneously working with this lender to expand the pool of capital available to women borrowers in the aftermath of Covid and the Ebola outbreak by providing the lender a US$100,000 returnable grant specifically earmarked for on-lending to women’s businesses. We supplemented this with a targeted piece of research that involved reviewing existing gender data and interviewing male and female customers to identify where there might be opportunities for this lender to be more gender inclusive.

                    The results point to both specific things this firm is doing right and where they might improve, while also providing a framework for how other firms might review their own data and practices in an effort to be more gender intentional.


                    Savings and Investments by the Low Income Segment in Capital Markets: A Case Of XENO

                    Savings and Investments by the Low Income Segment in Capital Markets: A Case Of XENO

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                      This report shares findings from a pilot intervention on savings and investments by the low income segment in capital markets. In this pilot, FSD Uganda focused on testing the viability of leveraging mobile phone and mobile telecommunications technology to increase access to investment products by the low income investor market segment. The intervention ran for two years and sought to address the problem of limited and or no access to financial investment products such as collective investment schemes (CIS) among the low income market segment.

                      For this pilot, we partnered with XENO a licensed fund manager and collective investment schemes manager regulated by the Capital Markets Authority (CMA) and the Uganda Retirement Benefits Regulatory Authority.

                      Three major drivers of this limited access to financial investment products were identified at the intervention design stage; low levels of income, cumbersome Know-Your-Customer processes at the time of on-boarding of the customer, and the limited accessibility of the customer engagement points.

                      XENO sought to address this problem by leveraging the mobile phone to increase accessibility and designing a more appropriate product that would make it easier for the low-income market segment to actively participate in the CIS market.


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