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.


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

    Download Report

    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


    Assessing National Funding for Women’s Economic Empowerment in Uganda

    Assessing National Funding for Women’s Economic Empowerment in Uganda

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      FSD Uganda was part of the advisory committee of a Publish What You Fund (PWYF) project that assessed national funding for women’s economic empowerment (WEE), women’s financial inclusion (WFI), women’s empowerment collectives (WECs), and gender integration (GI) in Uganda. The project also assessed funding in Ethiopia and Pakistan.

      The team worked with public expenditure experts to examine national and sub-national funding for WEE, WFI and WECs for the last five years. These outputs stem from the PWYF WEE project, which is building evidence to inform better investment decisions.

      The Uganda based report assesses the national funding to WEE, WFI, and WECs over five years: financial year 2016/17 to 2020/21. The report details the budget process, highlighting gender and equity (G&E) planning and budgeting. The analysis establishes the amount of funding appropriated to gender-responsive interventions, the proportion of appropriated funds released, and the proportion effectively utilised. The areas of focus included sectors that implement explicit programmes and/or interventions on women and girls to economically empower them, namely: health, education, social development, agriculture, water and environment, and energy.

      The study used a mixed-methods approach, including the quantitative and qualitative analysis of primary data sources and key informant interviews (KIIs). This study ascertains the extent to which and the areas wherein the Government of Uganda (GoU) has over the years contributed to improved quality of life and equal opportunities for women and girls in accessing, benefiting, and participating in development programmes.

      The reports provide useful insights for policymakers and gender advocates to support better funding approaches to advance gender equality and women’s economic empowerment. It also includes recommendations for improving the transparency of women’s economic empowerment funding.


      Baseline Assessment of the Microinsurance Needs of Informal Traders in Uganda’s Markets

      Baseline Assessment of the Microinsurance Needs of Informal Traders in Uganda’s Markets

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        While the benefits of microinsurance products are generally accepted, the microinsurance market in Uganda remains small. As of June 2022, there were only two microinsurance firms in Uganda, one of which is yet to provide microinsurance products. Traditional insurance providers have also claimed a lack of knowledge and data necessary to develop microinsurance products that meet the needs of the population. This study, therefore, attempts to fill this gap by conducting research on the microinsurance needs of the informal economy in Uganda.

        The study focuses on market vendors in seven markets in Kampala as proxy for the informal economy. It sought to answer five research questions:

          • What are the main risks (frequency & impact) that affect market vendors in selected markets?
          • What is the level of willingness to insure against those risks and preferred mode of payment by market vendors?
          • What are the factors that influence decisions to subscribe to microinsurance products?
          • Which additional features (value addition) of an insurance product would informal market vendors be interested in?
          • What are the barriers to microinsurance demand (adoption and usage) among market vendors?

        A mixed methodology was used in which a survey was distributed to four market vendors and a chairperson in seven markets: Nakasero, Wandegeya, Kalerwe, Kasubi, Kamwokya, St. Balikuddembe (Owino) and Kikuubo.


        Validation of a Report, an Assessment of the Microinsurance Needs of Uganda’s Informal Traders

        Validation of a Report, an Assessment of the Microinsurance Needs of Uganda’s Informal Traders

        Kampala, Uganda: The Uganda Insurers Association (UIA) and the Makerere University Business School (MUBS) will today, during a validation workshop share findings from research that assessed the microinsurance needs of Uganda’s informal traders to inform microinsurance product development.

        This follows feedback from traditional insurance providers that suggests a lack of knowledge and data necessary to develop microinsurance products that meet the needs of the population.

        Microinsurance operates the same as conventional insurance except that it targets low-income individuals allowing them to pay smaller value premiums for protection from commensurate risks. The flexibility of the microinsurance product makes it potentially suitable for consumers in Uganda’s informal economy, who form most of the working population in Uganda.

        Insurance plays an essential role in the economy by providing a buffer should risks such as poor health, theft, fire, or damage occur. However, the level of insurance penetration in Uganda is extremely low at approximately 1%. This low uptake is largely due to low income and therefore, cost of insurance, lack of knowledge and awareness of the product and low levels of trust from most of the population.

        “A key solution devised to overcome the perceived high cost of insurance, especially among the lowincome population, is to provide a customised microinsurance product to meet the specific needs of this segment of the population,” explains Mr Jonan Kisakye, the Chief Executive Officer, Uganda Insurers Association.

        While the benefits of microinsurance products are generally accepted, the microinsurance market in Uganda remains small. As of June 2022, there were only two microinsurance firms in Uganda, one of which is yet to provide microinsurance products.

        The research found that the understanding of microinsurance and the main risks facing market vendors differed from one stakeholder to another. Most market vendors are not willing to pay for insurance which isn’t tangible and from which they might not benefit or retrieve a portion of the premiums paid.

        Those willing to pay indicated the ability to pay premiums amounting to Ush30,000 monthly. These were willing to pay for microinsurance products that feature medical-related products, simplified documentation, affordability, and diversity of products.

        Additionally, a generally limited understanding of insurance and a lack of trust in providers were noted.

        “Based on the research findings, we recommend sensitisation and awareness initiatives that promote microinsurance literacy among informal groups as a tool to increase uptake. There is also need to encourage consumer protection against exploitative pricing and poor products. Further, insurers need to adopt a marketing strategy that clearly articulates the value proposition by recognising the differing needs and attitudes of the market vendors,” says Dr Rachel Mindra Katoroogo, the lead researcher and Dean, Faculty of Commerce and Senior Lecturer at Makerere University Business School.

        “Financial Sector Deepening Uganda offered financial and technical support to this research process because of the important role insurance can play in creating financial resilience. This research study is one of a number of collaborations between universities and local industry associations that we have supported to promote contextually relevant research for the financial sector. We hope this will increase collaboration between academic institutions and associations to develop evidence-based solutions for financial inclusion,’’ says Joseph Lutwama, Director of Programs, Financial Sector Deepening (FSD) Uganda.

        Note to the editor

        About UIA

        The Uganda Insurers Association (UIA) is an umbrella organisation for all insurance and reinsurance companies in Uganda and works for the establishment and development of a sound insurance industry. UIA works to advance the interests of insurance and reinsurance companies by adopting a common strategy that encourages and promotes close cooperation, the exchange of business among members, builds on knowledge through research, influences the enactment of favorable legislation, and represents the views of the membership to the Government, quasi-government, and private bodies. The insurers are 36 and reinsurers, 4. The insurers are divided into non-life totaling to 21 companies, life has 9 companies and there are 2 microinsurance companies.

        About MUBS

        Makerere University Business School (MUBS) is the leading provider of business and management education and research that facilitates professional and industry development in the region. MUBS was established to centralise the development and standardisation of business and management education in the country while creating an environment and opportunity for the young and old to develop their talents and strengths through different academic and training programmes. These programmmes are offered at undergraduate, postgraduate to professional level.

        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:

        Peter Simon Odoki, Public Relations Officer, MUBS via or +256-772402575/+256-702402575

        Kalule Gava Ibrahim, Publicity, Advocacy and Market development Officer, UIA via or +256-782 044 787


        The State of Financial Inclusion in Uganda: An Analysis of the 2019/20 Uganda National Household Survey Findings

        The State of Financial Inclusion in Uganda: An Analysis of the 2019/20 Uganda National Household Survey Findings

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          In today’s increasingly connected world, access to useful and affordable financial products and services that meet the needs of individuals and businesses is a critical factor to their survival, growth, and sustainability. Since the early 2000s, financial inclusion has been a constant focus of global development stakeholders and a “stated goal for both public and private sector actors.”

          In 2013, the Bill & Melinda Gates Foundation (BMGF) launched the Financial Inclusion Insights (FII) programme to track the progress of financial inclusion in Uganda and seven other countries in Africa and Asia. In 2019, BMGF handed over FII initiatives to local stakeholders to ensure ownership and buy-in from in-country private and public agencies, better integration of FII data in the decision-making process, and long-term sustainability of FII research and action.

          To leverage a large-scale population study and link FII metrics with other household and individual-level statistics, a set of FII questions was included in the Uganda National Household Survey (UNHS) carried out by the Uganda Bureau of Statistics (UBoS) from September 2019 to November 2020. This report offers the first-round of analysis of FII data collected via a harmonization with the UNHS. The findings presented in this report are comparable with the FII 2017 and FinScope 2018 survey results in Uganda.


          Uganda’s National Fourth Industrial Revolution(4IR) Strategy – Annexure

          Uganda’s National Fourth Industrial Revolution(4IR) Strategy – Annexure

          Draft opportunity assessment and digital readiness assessment

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            A three-component framework is used to assess and compare the technology strategies of a peer group of countries and draw learnings for the formulation of national fourth industrial revolution (4IR) strategies. The first component is the objectives that have been made explicit in the 4IR strategies. This looks for discussions on goals, aims, purposes and other synonyms for objectives. The second is the focus of the strategies, either technology or opportunity focused, and the sectors to which the strategies are applied. A technology focused approach is one in which the strategy is developed by anchoring on 4IR technologies and outlining how those technologies can be applied across sectors. This measure excludes Artificial Intelligence (AI) strategies from the set of technology-based strategies because AI strategies are common across countries.. An opportunity focused approach is one in which the strategy is anchored on key areas of opportunity, for instance economic sectors, in which numerous 4IR technologies can be applied. The final component is the key levers for action outlined in the strategies. Here, the tools and activities the nations will focus on to achieve their objectives are assessed. The comparison will provide insights on international best practices and common trends in 4IR strategy planning. Many countries refer to or take inspiration from the strategies of others . Learning from others provides an array of ideas and experiences from which to draw to draft comprehensive and well considered strategies.


            Five Years of the Fintech Association, a Case for Robust Industry Associations

            Five Years of the Fintech Association, a Case for Robust Industry Associations

            By Brenda Banura

            Congratulations to the Financial Technologies Service Providers Association (FITSPA) on reaching another milestone, a celebration of five years of stewardship in the financial technology (fintech) industry.

            Prior to the birth of FITSPA – the fintech association, the digital financial solutions sector in Uganda was in a frenzy propelled by the significant takeoff, of mobile money. Mobile money subscribers had dramatically grown from 0.6m in 2009, the year of introduction, to 23.3m by 2017. Usage of mobile money had evolved from money transfers to include payments, savings, credit, and cross-bank transfers making it a fully-fledged digital payments ecosystem.

            The regulatory framework

            These innovations happened in an environment that lacked a robust legal and regulatory framework except for mobile money guidelines, which were not comprehensive for the increasingly complex financial system.

            The government was keen on formalising this sector, but there was no credible industry body to work with to make this possible. Unlike other sectors like banking, insurance and microfinance, the fintech community did not have an association that could engage government and other major stakeholders to further the interests of the digital payments ecosystem. There was need for formalisation for the industry to thrive.

            FSD Uganda’s role in FITSPA’s set up

            For the Financial Sector Deepening (FSD) Uganda, the establishment of FITSPA was important because technology comes with affordability and efficiency. These aspects play a significant role in increasing financial inclusion. Financial technology makes it affordable to reach the underbanked in remote rural areas efficiently, in addition to smoothening the value and supply chain.

            To kick start the step-up, FSD Uganda played a convening role bringing all fintechs together to build consensus around forming an association. FSD Uganda then funded legal support to set up, register and offer guidance on how to build a strong association.

            This is in addition to supporting the association in developing an industry code of conduct to improve the integrity of the FinTech industry and ultimately increase customer, regulator, and investor confidence.

            FSD Uganda also introduced FITSPA to regulators and advocated for the association to have a seat at the table.

            In July 2017, FITSPA was launched to give fintechs a voice to lobby for appropriate regulation and a platform to engage with regulators. True to its founding objectives, in 2020, the National Payment Systems (NPS) Act was passed.

            After the setup of FITSPA, FSD Uganda provided hands-on support to FITSPA members to operationalise the NPS Act in preparation for the license application. To aid this process, a Compliance Toolkit that would assist its members in implementing the provisions of the NPS regulations was developed.

            To date, FSD Uganda continues to provide guidance and influence in all matters geared towards supporting growth aimed at increasing financial inclusion while navigating the dynamics of developing useful financial digital solutions.

            As it celebrates its fifth anniversary, FITSPA has grown by leaps and bounds. The process has been long, and challenging but, in the end, worthy because of the benefits of industry associations that were made evident along FITSPA’s journey.

            Dividends of associations

            Associations enhance the credibility of the members. Until the payment aggregators came together under FITSPA, the industry had little credibility. FITSPA opened the door to solid partnerships within government, private sector, and the international community. FITSPA has now built meaningful partnerships with key stakeholders like the Central Bank, Uganda Bankers’ Association, Private Sector Foundation, the Uganda Institute of Banking and Financial Services, and National Information Technology Authority Uganda. The association has also succeeded in raising funds for further development of the Fintech Ecosystem in Uganda. So far FTSPA has received funding from aBi Finance, International Trade Centre, and the Bill and Melinda Gates foundation. The association is also the founder member of the African Fintech Network and even went on to host the Africa Fintech Festival in 2019.

            Related to enhancing credibility, associations also ensure accountability. The industry through their association can agree on a set of standards against which every member would be evaluated and sanctioned in the event of a breach. FITSPA’s code of conduct and the National Payment Systems policy, legal and regulatory framework in place are benchmarks for this.

            Visibility and brand value are other benefits of associations especially to the small players. They leverage the platform of the association to tap into the networks of the industry and showcase their services at the lowest possible cost. Irrespective of the size and market share, all members of the association will have visibility at all the association events, publications and platforms. Being a member of FITSPA will open doors previously impossible to open because the small FITSPA members can leverage the FITSPA brand and networks.

            Associations provide a platform to access opportunities previously unimaginable especially for the small players. FITSPA has been able to mobilise funding and technical support that has and will continue to benefit its members especially the small members. For example, FITSPA was able to secure technical support from FSDU to develop a toolkit for preparing its members to understand the policies and apply for licenses under the National Payments Systems Act. The members supported each other and today, 15 fintechs have been licensed by the central bank, most of them being FITSPA members. Many other members have started the process to obtain licenses. For some of the small members, this is not a service they would have easily accessed outside the FITSPA membership.

            Five years ago, today’s fintech milestones would be a dream if fintechs big or small had attempted to achieve them solely.  But together so much has been achieved and more is yet to come. Like FITSPA, FSD Uganda in its role as a market facilitator has and will continue to support the growth and development of industry associations. Notable examples of such associations include the Uganda Bankers Association (UBA), the Uganda Insurers Association(UIA), and the Association of Microfinance Institutions of Uganda(AMFIU) all key players in the increase of meaningful financial inclusion.


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