Banking Sector

The Ugandan banking sector is comprised of 26 commercial banks, which dominate the industry with total assets amounting to UGX 49.5 trillion (USD 13.09 billion) as of December 2023. The sector experienced substantial growth, with commercial bank assets expanding by 8.9% in 2023, reflecting an increase of UGX 4 trillion (USD 1.058 billion) compared to 2022. This strong performance was largely driven by two key factors: a 7% rise in loans and advances to customers, signaling increased lending activity and higher credit demand, and a 13% growth in marketable trading securities, highlighting a greater emphasis on investment and trading.

The distribution of the asset structure in the Uganda banking system shows that net customer loans and advances remain the largest asset component, though they have slightly declined from 43% in 2019 to 41% in 2023. This suggests a cautious lending approach by banks, potentially influenced by economic conditions, risk management strategies, or tighter monetary policies. Meanwhile, balances with banking institutions have steadily decreased from 8% in 2019 to 5% in 2023, indicating reduced interbank placements, possibly due to shifting liquidity management strategies.

Marketable trading securities, which include government bonds and other liquid investments, have fluctuated but remain a significant asset class, dropping from 22% in 2019 to a low of 12% in 2021 before recovering to 20% in 2023. This suggests banks may have adjusted their investment portfolios in response to interest rate movements and market conditions. Financial investments have seen an increase since 2019, reflecting greater diversification in asset allocation, while cash and balances with the Bank of Uganda have remained relatively stable, hovering around 13-15%. Overall, the data suggests a cautious banking environment where banks are balancing lending with investment in securities, maintaining liquidity, and adapting to economic changes. The decline in net loans and the rise in financial investments and marketable securities could indicate risk aversion or a shift towards safer assets in response to economic uncertainties.

In 2023, commercial bank credit experienced an 8% year-over-year (YoY) increase, amounting to UGX 1.4 trillion (USD 370.33 million). This growth surpassed the previous year's 6% rise. The expansion was primarily driven by key sectors, including personal and household loans (36%), building, mortgage, construction, and real estate (13%), agriculture (13%), and trade (9%). However, credit growth was slightly offset by a 5% decline in lending to the electricity and water sector.

Over the past 11 years, commercial bank liabilities have grown at an average annual rate of 11%, reaching UGX 40.1 trillion (USD 12.61 billion) by the end of December 2023. This reflects an average annual increase of 8% year over year. This growth was primarily driven by customer deposits, which recorded an average annual growth rate of 12%, consistent with the trend observed over the previous decade (2011–2022).

Banking sector soundness Indicators

The banking sector remains resilient, with enhanced capital buffers, improved asset quality, recovering profitability, greater operational efficiency, and stabilizing liquidity.

Capital adequacy indicators show a strengthening financial position. Regulatory capital to risk-weighted assets increased from 21.4% in 2019 to 25.5% in 2024, reflecting improved capital buffers. Similarly, Tier 1 capital to risk-weighted assets rose from 19.7% to 24.2%, indicating a stronger core capital base.

Asset quality has also improved over the period. Nonperforming loans as a percentage of total gross loans peaked at 5.3% in 2020 and 2021 before declining to 4.8% in 2024, reflecting improved loan performance and risk management. Meanwhile, provisions to nonperforming loans, which measure the extent of reserves set aside for bad loans, rose from 51.4% in 2019 to a peak of 63.8% in 2022 before settling at 58.2% in 2024, showing a cautious but fluctuating provisioning strategy.

Profitability trends indicate a recovery after a dip in 2020. Return on assets (ROA) declined from 3.9% in 2019 to 3.4% in 2020 but gradually increased to 4.3% in 2024, reflecting improved earnings efficiency. Similarly, return on equity (ROE) dropped from 16.9% in 2019 to 14.7% in 2020 but rebounded to 17.8% in 2024.

Liquidity indicators fluctuated over the years but showed signs of improvement in 2024. Liquid assets to total assets peaked at 35.2% in 2020 before declining to 31.4% in 2024, suggesting a shift in asset allocation. Similarly, liquid assets to short-term liabilities dropped to 49.1% in 2022 but rebounded to 61.0% in 2024, indicating improved short-term liquidity management.

Financial Inclusion

Access to financial services in Uganda has significantly improved in recent years. According to the FinScope 2023 study, 81% of Ugandan adults are financially included.  This is an increase from the 77% of Ugandan adults who were financially included in 2018. Gender disparities in financial inclusion exist in Uganda as in both years, more males are financially included than females. The people residing in the urban areas are more financially included than those in rural areas. 

The adult population who are formally included increased to 68% in 2023 as compared to 58% in 2018. The informally[1] included adults also increased. Mobile money is the primary driver of formal financial service usage, particularly for remittances, and plays a vital role in enhancing financial inclusion. Around 64% of adults are registered for mobile money, followed by Savings and Credit Cooperative Organizations (SACCOs) at 36.4%, and banks at 14%. Other formal financial services used include pensions (4%), microfinance institutions (MFIs) or microlenders (3%), insurance (2%), and formal money lenders (1.5%). Moreover, informal financial service channels were used by 6.3% of the population in 2023, a significant increase from 1.6% in 2018.

Village Savings and Loan Associations (VSLAs) remain the primary providers of informal financial services, although the usage of their services has remained consistent since 2018. In contrast, the role of informal money lenders within the community is growing, with the adoption of their services more than doubling from 2% in 2018 to 7% in 2023.

Financial inclusion in Uganda and Tanzania is quite similar, with Tanzania showing greater usage of formal financial services and Uganda relying more on informal services.

After the evaluation of the National Financial Inclusion Strategy I 2017 – 2022 (NFIS I), the Bank of Uganda, the Ministry of Finance, Planning and Economic Development, and other stakeholders implemented the NFIS II to inform the lessons learned. Uganda’s National Financial Inclusion Strategy II (NFIS II) for 2023–2028 aims to significantly improve financial inclusion across the country by ensuring that all Ugandans have access to a diverse range of high-quality and affordable financial services, including savings, credit, insurance, and payment systems. One of the key objectives is to increase access to financial services, particularly for underserved populations, while also enhancing financial literacy to enable individuals to make informed financial decisions. The strategy focuses on strengthening financial infrastructure and promoting the adoption of digital financial services, leveraging technology to broaden access in remote areas. Furthermore, consumer protection is emphasized, with the establishment of frameworks to safeguard citizens' rights within the financial sector.

By focusing on these objectives, NFIS II is expected to reduce financial exclusion, foster greater economic participation, and drive sustainable economic growth. The strategy’s emphasis on digital services and infrastructure development is likely to make financial services more affordable and accessible, especially to populations that have historically been underserved. The combination of improved financial literacy and consumer protection will empower individuals to navigate financial services more effectively and securely. While the strategy sets a course through 2028, its successful implementation will lay the groundwork for continued progress, contributing to broader socio-economic development and long-term financial inclusion for Uganda.

The Non Bank Financial Institutions (NBFIs) Sector

Uganda's Non-Bank Financial Institutions (NBFI) sector comprises credit institutions, Microfinance Deposit-Taking Institutions (MDIs), Non-Deposit Taking Microfinance Institutions (NDTMIs), Savings and Credit Cooperatives (SACCOs), self-help groups, commodity-based microfinance institutions, money lenders, insurance companies, insurance brokers, leasing companies, and a development bank.

Credit institutions, classified as Tier II financial entities, operate as non-bank financial institutions authorized to accept call and time deposits, which are repayable after a specified period or upon notice. These deposits are then utilized, either wholly or partially, for lending or other financial activities at the risk of the accepting institution.

Microfinance Deposit-Taking Institutions (MDIs), categorized under Tier III, are companies licensed to conduct microfinance business in Uganda. These institutions play a crucial role in providing financial services to underserved communities. As of 2023, Uganda had four licensed MDIs operating under regulatory oversight.

Tier II and Tier III financial institutions assets experienced a 6% year-on-year growth, reaching UGX 1.3 trillion (USD 343.88 million). This was driven by a 9% increase in customer loans and advances and a UGX 164 billion (USD 43.38 million) rise in financial investments. However, one MDI (EFC Uganda Limited) ceased operations in January 2024, and its financial performance was not included in these figures. (NB. There are currently 3 MDIs).

Loans and advances remain the primary investment focus for both Tier II and Tier III institutions, as they are the key drivers of income through interest and fees. From 2019 to 2023 loans and advances to customers consistently represent the largest portion of total assets, though they declined from 60% in 2019 to 54% in 2020 before stabilizing at 56% in 2023. Financial investments have remained relatively stable, fluctuating between 12% and 15%, with a peak of 23% in 2022 before settling at 13% in 2023.

Balances with banking institutions exhibited fluctuations, starting at 19% in 2019 before declining and stabilizing around 11%-12% in later years, with a slight dip in 2022 to 15%. This trend suggests a shift away from liquidity holdings in banks, possibly to maximize returns through other assets. Similarly, cash and balances with the Bank of Uganda remained a minor asset component, varying between 3% and 6%, with a slight increase in 2023. Marketable trading securities consistently accounted for the smallest share, never exceeding 2% in any year. Other assets fluctuated between 11% and 17%, peaking in 2022 before declining to 13% in 2023.

Digital Finance

Bank of Uganda data reveals that the number of mobile money customers has grown by 60% over five years, reaching 43,409,491. During the same period, mobile money transactions surged, with 6.4 billion transactions totaling UGX 227.5 trillion (USD 60.2 billion) in 2023, reflecting a 126% increase in transaction volume and a 211% rise in transaction value.

The banking industry has been rapidly transitioning towards digitalization, aligning more with consumer expectations. Online and mobile channels are now as crucial, if not more than traditional branches and ATMs, as banks invest heavily in digital capabilities to improve customer acquisition and satisfaction. While digital adoption is growing, many customers still prefer traditional methods for complex services. A significant portion of banking processes remains dependent on human intervention and non-digital documents. E-payment awareness remains low, and security concerns are a major barrier for many non-users. The primary driver for digital transfers is sending or receiving remittances, with millions of people using mobile money for these transactions.

SME Financing

Micro, Small, and Medium Enterprises (MSMEs) in Uganda face substantial financing challenges that hinder their growth and development. One of the major issues is the shortage of long-term financing. Uganda's low savings rate, approximately 14% of GDP, limits the availability of long-term capital for MSMEs, which restricts their ability to invest in growth opportunities. Financial institutions such as DFCU Bank have acknowledged this gap and are seeking external funding sources to bridge it. Another challenge is working capital constraints caused by delayed payments in supply chains, with MSMEs often facing payment terms ranging from 30 to 180 days, which affects their liquidity and operational efficiency. Additionally, SMEs in specific sectors, such as oil and gas, struggle to access the necessary financial products due to capacity limitations, inadequate collateral, and insufficient financial reporting. This exclusion limits their ability to participate in profitable sectors.

The lack of sufficient long-term financing also limits the ability of SMEs to invest in growth and expansion. Initiatives like the African Development Bank's $5 million non-sovereign line of credit to the Uganda Development Bank aim to address this issue by supporting SME financing. Furthermore, partnerships such as the one between the African Guarantee Fund (AGF) and Centenary Bank are working to unlock nearly USD 200 million in financing for over 700 SMEs, helping them access the capital needed for growth. Additionally, the revival of the Uganda Co-operative Bank is proposed to address the financing gap in sectors like agriculture and micro and medium-scale enterprises, making affordable financing more accessible.

Insurance Sector

The insurance sector is supervised and regulated by the Insurance Regulatory Authority (IRA) of Uganda. The insurance sector has experienced steady growth, with notable brokerage, bancassurance, and microinsurance increases. Insurance brokers grew from 35 in 2016 to a peak of 51 in 2022 before slightly declining to 49 in 2023. Loss assessors increased from 21 to 29, while bancassurance agents expanded from just 2 in 2017 to 20 by 2019, stabilizing at 19 from 2021 onwards. Microinsurers also grew from 0 in 2016 to 5 in 2023. Non-life and life insurance providers remained stable. Reinsurers and reinsurance brokers showed moderate growth, with reinsurance brokers rising from 1 in 2016 to 4 in 2023, signaling improved risk management. However, HMOs declined from 6 in 2016 to 2 in 2023, possibly due to market exits or regulatory changes. The sector's expansion is driven by increased insurance penetration, diversification, and evolving market dynamics.

The insurance sector experienced positive growth in net assets. Non-Life and Life Insurance remain the dominant sectors, making significant contributions to the industry's total net assets. Although the HMO and Micro-insurance sectors are smaller, they contribute to industry diversification. Health insurer assets were excluded due to data unavailability in all years except 2021, where they recorded net assets of UGX 95.56 billion (USD 25.28 million). The total industry net assets across all segments have shown an overall growth trend, rising steadily from UGX 551.87 billion (USD 152.27 million) in 2019 to UGX 842.9 billion in 2023 (USD 222.96 million).

In terms of gross written premiums, the Non-Life Gross Written Premium grew by 3.79%, increasing from 898.1 million in 2022 to 932.1 million in 2023. The Foreign Reinsurance Business Ceded to Reinsurers saw a significant rise of 26.87% in the same period, suggesting an increased reliance on foreign reinsurers to manage risk. The Life Gross Written Premium recorded strong growth of 21.90%, rising from 501.6 million in 2022 to 611.5 million in 2023, reflecting greater demand for life insurance products. The HMO Gross Written Premium experienced the highest growth at 47.24%, increasing from 38.3 million to 56.3 million in the same period. Similarly, the Micro-Insurance Gross Written Premium grew by 15.75%, showing improved adoption of insurance services among low-income populations. The Grand Industry Total, summing up all segments, reached 1.6 billion in 2023, reflecting an 11.29% growth from 2023.

Meanwhile, the GDP at Market Prices grew by 13.63%, from 162.7 billion to 184.9 billion, showing overall economic growth over the same period. However, insurance penetration, which measures the industry's contribution to GDP, slightly declined from 0.885% to 0.867%, suggesting that despite industry growth, it is not expanding at the same pace as the overall economy.

The Capital Market

Uganda's capital markets, regulated by the Capital Markets Authority (CMA), are centered around the Uganda Securities Exchange (USE), which opened in 1997 and is a member of the African Stock Exchanges Association. The USE ended the year 2023 with 18 listed companies. Ten companies are locally listed, while eight are cross-listed from the Nairobi Securities Exchange.

The Uganda Securities Exchange (USE) experienced a 10.5% decline in total market capitalization (both foreign and domestic market capitalization), dropping from UGX 19.7 trillion (USD 5.29 billion) at the end of FY 2021/22 to UGX 17.7 trillion (USD 4.68 billion) by the close of FY 2022/23. This downturn was driven by falling market capitalization across all cross-listed counters, except only one, as well as declines in four locally listed companies. The share price losses responsible for this decline were largely attributed to weak investor demand and a challenging macroeconomic environment in the region.

In contrast, domestic market capitalization, which reflects the value of locally listed companies, recorded a 2.5% increase, rising from UGX 7.1 trillion (USD 1.9 billion) in FY 2021/22 to UGX 7.3 trillion (USD 1.93 billion) in FY 2022/23. This growth was fueled by gains in the market capitalization of five locally listed companies. The increase in the two domestic markets’ capitalization followed the successful listing of bonus shares, while other stocks saw gains due to higher demand outweighing supply.

Despite the increase in domestic market capitalization, its ratio to GDP fell slightly from 5.2% in FY 2021/22 to 5.1% in FY 2022/23, as GDP growth outpaced capital market expansion. However, this ratio remains above the National Development Plan III (NDP III) target of 4.5%. When compared to regional and international markets, Uganda’s domestic market capitalization to GDP ratio remains relatively low. At the end of FY 2022/23, Kenya, Tanzania, and Nigeria recorded ratios of 12.7%, 7%, and 38.1%, respectively, underscoring the need for further market development to enhance Uganda’s capital markets.

Equity turnover at the Uganda Securities Exchange (USE) rose by 33.4% in FY 2022/23, reaching UGX 59.1 billion (USD 15.63 million), up from UGX 44.3 billion (USD 11.9 million) in the previous year. Despite this growth, Uganda's equity turnover ratio stood at 0.3% in 2023, significantly lower than Kenya’s 6.2% and Tanzania’s 0.7%, highlighting the potential for further market expansion. Other markets have boosted participation through investor education, technological advancements, and pension reforms, strategies that Uganda is also adopting. Over the past five years, USE’s total equity turnover has grown at an annualized rate of 6%, increasing from UGX 46.9 billion (USD 12.94 million) in FY 2018/19 to UGX 59.1 billion (USD 15.63 million) in FY 2022/23.

The USE introduced amendments to its Listing Rules, Fees, Charges & Penalties Rules, and Trading Rules. According to Chambers and Partners (2025), notable changes include Rule 4(2), which now grants the USE discretionary power to suspend listed securities under various circumstances such as liquidation or non-compliance by the issuer. Additionally, Rule 9(1) increases fines for issuers violating Listing Rules, aligning penalties with Rule 29 of the Fees, Charges & Penalties Rules to enforce stricter sanctions. Furthermore, Rule 36(4) mandates that notices and announcements be published in nationally circulated newspapers, while financial statements must comply with International Financial Reporting Standards (IFRS).

As part of its regional expansion strategy, the USE has become the tenth African securities exchange to join the African Exchanges Linkage Project (AELP), a project aimed at facilitating cross-border trading of securities across Africa[2]. This integration allows Ugandan brokers to execute orders on other participating exchanges, thereby improving market liquidity and broadening investment opportunities. For African DFIs, these regulatory enhancements and the USE’s inclusion in the AELP present an attractive investment landscape. The strengthened regulatory framework fosters a more transparent and well-regulated market, while cross-border trading capabilities offer diversification prospects. By capitalizing on these developments, DFIs can expand their investment portfolios and contribute to regional economic growth through enhanced market participation.

Social Security

The pension sector in Uganda is regulated by the Uganda Retirement Benefits Regulatory Authority (URBRA), a semi-autonomous government agency established in 2011. URBRA is responsible for regulating, licensing, supervising, and controlling the retirement benefits sector in Uganda. The authority’s entities show that there was a new licensed segregated voluntary Scheme for the year 2023/24. Two administrators and one fund managers have exited the sector.

The number of member accounts grew by 7%, rising from 3,142,311 in FY 2022/23 to 3,367,545 in FY 2023/24, reflecting increased confidence in the sector. This growth was driven by the Authority’s strong supervisory oversight and proactive awareness campaigns, which enhanced compliance, facilitated the creation of new schemes, and encouraged more employers and employees to join umbrella schemes. As a result, member contributions saw an 8% increase, climbing from UGX 2.20 trillion in FY 2022/23 to UGX 2.38 trillion in FY 2023/24. Contributions were primarily sourced from employers, who accounted for 65%, while employees contributed the remaining 35%.

The sector’s assets as a percentage of GDP (%GDP) show a steady increase over the years, with assets rising from 11% of GDP in 2020 to 12.2% in 2022 and 2024, with slight variations in between. This reflects growth in pension sector assets and sector stability.

______________________________________________