MICROFINANCE

INDUSTRY REPORT
2023
© AMFIU, 2023
For comments or inquiries please contact:
AMFIU Plot 679, Wamala Road (off Entebbe Road)
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 MICROFINANCE
INDUSTRY REPORT
2023
 THE STATE OF MICROFINANCE IN UGANDA 2023

ACKNOWLEDGEMENT
AMFIU would like to thank all Financial Institutions that managed to submit their
data using the Performance Monitoring Tool on a quarterly basis. We also wish
to acknowledge our development partners who have walked the journey with us
ever since PMT was initiated up to this time when it is going through this further
upgrade i.e. Soluti, MSC, among others. In a special way we wish to applaud aBi
Finance and Feed the Future ISS for the financial support and Technical Assistance
they have availed AMFIU in upgrading the PMT.

For the preparation of the report, gratitude goes to the Executive Director of
AMFIU Jacqueline Mbabazi whose guidance and expertise contributed much
to the report, Robert Ntalaka the Chief Editor who is the Manager in charge of
Information and Marketing as well as Veronica Nakachwa the Senior Programme
Officer in charge of PMT.

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 THE STATE OF MICROFINANCE IN UGANDA 2023

TABLE OF CONTENTS

ACKNOWLEDGEMENT 1
TABLE OF CONTENTS 2
LIST OF ACRONYMS 4
EXECUTIVE SUMMARY 6

1.0 INTRODUCTION 7
1.1 Objectives of the report 7
1.2 Methodology Used 7

2.0 THE UGANDAN ECONOMY 8

2.1 Credit Extensions 10
2.2 Poverty Levels in Uganda 11
2.3 Overview of Excluded/Vulnerable Populations 12

3.0 OVERVIEW OF THE FINANCIAL SERVICES SECTOR 24

3.1 Global Microfinance Trends 24
3.2 Overview of the Financial and Insurance Services Sector in Uganda 30
3.3 Structure of the financial Services Sector 31
3.4 Developments in the financial services in Uganda 35

4.0 PERFORMANCE ANALYSIS 39

4.1 Portfolio and Outreach 39
4.2 Categories of Reporting Institutions 39
4.3 Category of Institutions by Location 40
4.4 Outstanding Portfolio by Regions 42
4.5 Profitability Indicators. 42
4.6 Portfolio Quality Ratios. 45
4.7 Capital Ratios 47
4.8 Efficiency and Productivity Ratios 48

5.0 ENVIRONMENT SOCIAL AND GOVERNANCE (ESG) 50

5.1 Introduction 50
5.2 Advantages of Investing in ESG 51
5.3 Why are ESG Reports Important? 51
5.4 ESG Findings from Reporting AMFIU Members 52

APPENDIX: 1 LIST OF REPORTING INSTITUTIONS 64

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List of Figures
Fig.1. New Credit Extensions Approved (Ushs Billion) 10
Fig.2 Percentage engaged mainly in agricultural activities 12
Fig.3: Education Levels of Agriculture Households 13
Fig.4: Sources of Credit for smallholder farmers 14
Fig.5: Proportion of respondents with basic literacy skills by gender 14
Fig.6: Proportion of respondents by population group, reporting having
selected digital literacy skills 15
Fig.7: Proportion of Respondents with Mobile Money Accounts by Gender 16
Fig.8. The figure below shows inflows and usage of digital payments by
women in developing economies 18
Fig.9. Gross loan portfolio and number of female borrowers. 25
Fig.10. Type of Financial Institutions in Africa, Asia and Latin America. 25
Fig.11. Financial Services Offered in Africa, Asia and Latin America. 26
Fig.10. Gender and Lending Methodology. 26
Fig.11. Impact of Loans on individual, Business and Household Outcomes
by Tenure 27
Fig.12. Impact of Individual, Business and Household Outcomes by
use of additional Services. 28
Fig.13. Impact on Individual, Business and Household Outcomes
by Use of Additional Services 29
Fig.14. Category of reporting Institution. 39
Fig.15. Category of reporting Institutions in the Central Region 40
Fig.16. Category of Reporting Institutions in Western region. 40
Fig.17. Category of Institutions in the Northern Region. 41
Fig.18. Category of Institutions in West Nile Region 41
Fig.19. Category of financial institutions in Eastern Region. 42
Fig.20. Operating Self Sufficiency Ratio 43
Fig.21. Portfolio Yield 44
Fig.22. Return on Assets 44
Fig.23. Return on Equity 45
Fig.24. Risk Coverage Ratio 46
Fig.25. Loan Loss Ratio 46
Fig.26. Debt to Equity ratio 47
Fig.27. Capital Adequacy ratio 48
Fig.28. Cost of Funds Ratio 48
Fig.29. Operating Cost ratio 49

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 THE STATE OF MICROFINANCE IN UGANDA 2023

LIST OF ACRONYMS
AFI Alliance for Financial Inclusion
AMFIU Association of Microfinance Institutions of Uganda
ATM Automated Teller Machine
BN Billion
BOU Bank of Uganda
CAGR Compound Annual Growth
CGAP Consultative Group to Assist the poor
CIs Credit Institutions
CLAP Covid-19 Liquidity Assistance Programme
CRBs Credit Reference Bureaus
DFS Digital Financial Inclusion
DRC Democratic Republic of Congo
EPRC Economic Policy Research Center
ESG Environment Social and Governance
FSP Financial Service Provider
FY Financial Year
GDP Gross Domestic Product
GLP Gross Local Portfolio
ID Identification
IRA Insurance Regulatory Authority
KYC Know Your Customer
MDIs Micro Deposit Taking Institutions
MFIs Micro Finance Institutions
MFPED Ministry of Finance Planning and Economic Development
MSEs Micro Small Enterprises
NAD Norwegian Association for the Disabled
NIN National Identification Number
NIRA National Identification and Registration Authority
NUDIP National Union of People with Disabilities
OCR Operating Cost Ratio
OTC Over the Counter
PAR Portfolio at Risk
PIN Person Identification Number
PMT Performance Monitoring Tool
PWDs Persons with Disabilities
ROA Return on Assets
ROE Return on Equity
SACCOs Savings and Credit Cooperative Organizations

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SFIs Supervised Financial Institutions

SPM Social Performance Management
UAIS Uganda Agriculture Insurance Scheme
UBOS Uganda Bureau of Statistics
UGX Uganda Shillings
UMRA Uganda Microfinance Regulatory Authority
UN United Nations
UNCDF United Nations Capital Development Fund
USD United States Dollar
WASH Water Sanitation and Hygiene

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EXECUTIVE SUMMARY
The microfinance sector in Uganda is among the growing sectors in the country not
only changing the livelihoods of communities but also employing a huge number
of people reducing the unemployment gap and contributing to the country’s
GDP. The present regulations in the country as well as the government support
programmes are seeing the sector take positive trends year after year.

This year’s report gives the overview of the Country’s economy in Chapter two, the
global financial services sector in chapter three, Financial Performance Analysis
for Chapter four, and then Analysis of the Environment, Social and Governance as
Chapter five.

Secondary data has been collected, data from financial institutions collected
and analyzed, data collection tools have also been used to analyze data for some
indicators.

Performance Highlights: 2023

Outstanding portfolio Total borrowers Female borrowers Voluntary savings Total assets
MFIs 389,077,555,763 360,884 229,616 0 231,877,421,705
Saccos 441,641,017,805 220,437 90,379 125,559,962,690 459,379,919,447
MDIs 459,399,684,549 123,520 47,094 110,349,439,450 760,544,515,829
Banks & CIs 989,226,023,662 357,020 209,092 551,154,488,548 6,309,106,532,281
Totals 2,279,344,281,779 1,061,861 576,181 787,063,890,688 7,760,908,389,262

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1.0 INTRODUCTION
Microfinance in Uganda continues to be recognized as one of the most prominent
tools in tackling poverty. For the industry to have a common voice, the Association
of microfinance institutions of Uganda was formed in 1996 and it has since then
continued to exist to share information, offer capacity building, lobby government
as well as giving updates on issues emerging in the industry to its member
institutions in collaboration with other related stakeholders that play part in the
sector.

AMFIU has for years been producing, publishing and distributing the annual
industry report for purposes of keeping the different stakeholders informed
and updated on the new developments both locally and globally. It is upon
this background that AMFIU has compiled the microfinance industry report
2022/2023.

1.1 Objectives of the report

i. To present the current status of the microfinance industry and the new
innovations and initiatives prevailing.
ii. To establish the contribution of the microfinance industry to Ugandan
economy and identify possible opportunities that can support the industry
to grow.
iii. To present the financial analysis of the financial institutions in the sector.

1.2 Methodology Used

A combination of methods have been used to collect information in the report
which included reviewing of secondary data, interacting with financial institutions
as well as reviewing data from reports submitted by AMFIU members and
nonmembers using the Performance Monitoring Tool (PMT).

Questionnaires have also been used to collect data from member institutions on
particular topics there after analyzed and presented.

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2.0 THE UGANDAN ECONOMY

According to the World meter updates October 2023, Uganda’s population was
estimated at 48,582,334 mid-year, contributing to 0.6% of the world’s population
with 28.6% of the population living in urban areas.

The economy remained resilient and continued on a recovery path despite

the lingering impact of COVID-19, global shocks and contractionary fiscal and
monetary policy measures taken to contain inflation. According to the Ministry
of Finance Planning and Economic Development, the economy increased to
Ushs. 184,288 billion in FY 2022/23, from Ushs.162, 883 billion registered in FY
2020/21. In real terms, the economy grew by 5.3 percent, compared to a revised
growth rate of 4.6 percent in FY 2020/21.

Economic growth is mainly attributed to Government initiatives to support

private sector activity and increased regional trade. Government initiatives
included; continued funding to EMYOOGA to support small service providers
and businesses, Small Business Recovery Fund to support small and medium
enterprises, and Uganda Development Bank to support manufacturers, among
others.

The three sectors of the economy i.e. Industry, services, agriculture, forestry and
fishing registered growth in FY 2022/23. The services sector grew by 6.2 percent
and contributed 42.6 percent to GDP; the industry sector grew by 3.9 percent
contributing 26.1 percent to GDP; the agriculture, forestry, and fishing sector
grew by 5.0 percent contributing 24 percent.

Table.1: Real GDP Growth FY2018/19-2022/23

YOY Growth Rate 2018/19 2019/20 2020/21 2021/22 2022/23
GDP at market prices 6.4 3 3.5 4.6 5.3
AGRICULTURE,FOREST-
RY&FISHING 5.3 4.8 4.3 4.2 5
Cash crops 4.7 7.8 12.5 5.7 2.1
Food crops 1.6 4.6 4.1 3.5 4.7
Livestock 7.3 7.9 7.8 8.3 8.9
Agriculture Support Ser-
vices 8.8 6.4 2.1 4.5 2.2
Forestry 3.6 3.3 2.9 3.2 3.1
Fishing 39.2 0.3 -8.8 0.3 7.7

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YOY Growth Rate 2018/19 2019/20 2020/21 2021/22 2022/23

INDUSTRY 9 3.2 3.5 5.1 3.9
Mining & quarrying 17.5 16.5 6.9 18.3 7.5
Manufacturing 7.7 1.3 2.2 3.8 3
Electricity 2.5 10.9 11.6 3.1 2.8
Water 4.7 4.1 4.8 6.3 5.4
Construction 14.2 3.8 3.6 5.2 4.7
SERVICES 5.8 2.5 2.8 4.1 6.2
Trade & Repairs 4.9 -1.3 -0.6 3.4 5.8
Transportation & Storage 0.8 -1.7 -0.3 -3.8 -7
Accomodation & Food Ser-
vice 0.5 -8.6 -0.6 -2.5 11.9
Information & Communica-
tion -6.8 19.6 11.8 7.4 10.4
Financial & Insurance 11.1 9.6 8.1 4.5 -1.5
Real Estate Activities 10.1 5.1 3.9 9.5 8
Professional, Scientific &
Technical 6.4 2.8 2.1 3.1 28.4
Administrative & Support
Service 17.2 7.5 2.3 3.5 18.3
Public Administration 4.2 16.2 12.6 3.5 0.8
Education 9.1 -2 -4.2 1.5 3.4
Human Health& Social
Work 5.3 1 7.1 9.6 5.1
Arts, Entertainment & Rec-
reation 22.1 -8.1 -13.7 -2.2 4
Other Service Activities 4.7 1.4 2.9 4.8 2.8
Activities of Households 2.8 2.8 2.7 2.8 2.7
Taxes on products 4.4 -1.6 6.2 7.5 6.3
Source: MFPED

The growth in the service sector was attributed to recovery in accommodation

and food services, and strong growth in wholesale and retail trade, real estate
activities, information and communication, education and human health activities.
However, other services like financial and transport services registered negative
growth on account of high inflation which led to lower profits.

The industry sector registered growth of 3.9 percent a slowdown from 5.1 percent
registered the previous Financial Year. This was largely due to slower growth in

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manufacturing and construction output. Growth in manufacturing was affected

by lower production from mainly pharmaceuticals, furniture and tea processing
while a slowdown in public construction affected output from construction. In
addition to this, increase in price of inputs also led to slower growth in the industry
sector.

The agriculture, forestry and fishing sector grew by 5.0 percent from 4.2 percent
in FY 2021/22 on account of increased food crop production, livestock as well as
recovery in fishing activities. Food crops such as maize, beans, matooke, sweet
potatoes registered higher production supported by good weather conditions for
most of the Financial Year. Fishing activities benefited from the removal of the
burn on fishing in some parts of the country. On the other hand, slower growth
in cash crop activities compared to the previous Financial Year is attributed to a
decline in coffee prices which undermined the value of coffee.

2.1 Credit Extensions

The value of credit approved in July amounted to UShs. 1,128.8 billion a slight
reduction from UShs. 1,180.7 billion approved in June. Nonetheless, this represents

Fig.1. New Credit Extensions Approved (Ushs Billion)

Source: (BOU)

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an approval rate of 61.0% of the total loan amount requested during the month.
The largest share of credit approved was towards the trade sector at 27.3% of
total approvals, closely followed by Personal and Household loans at 26.5%. Other
notable recipients of credit were Business, Community, Social and other Services
at 15.6%, the Agricultural sector at 11.9% and Building, Construction and Real
Estate at 11.2% as shown in the figure below.

2.2 Poverty Levels in Uganda

According to the World Bank poverty assessment report, Strengthening
Resilience to Accelerate Poverty Reduction in Uganda, the share of Uganda’s
population that lives below the poverty line has fluctuated over the last seven
years, greatly influenced by shocks that have tested the resilience of the people.
Numerous shocks not only reduced economic growth, they also hampered the
ability of households to increase their income. Shocks have disproportionately
affected Uganda’s poor and rural residents, according to the report, with 40% of
rural and 30% of urban households experiencing at least one since 2013. About
90% of farmers report that climate conditions have grown worse for agriculture
over the last decade.

According to the World Bank poverty assessment report, about 30% of the
country’s population was poor in 2019-20, which is comparable to the poverty
rate of 30.7% in 2012-13. The poverty rate used in the study is based on revisions
made to the poverty line by the Uganda Bureau of Statistics in 2021, which were
meant to expand the scope of Uganda’s poverty measurements to cater for the
cost-of-living in the country “within the context of modernizing societal aspirations
and rising standards of living.” Given the limited amount of social assistance
available in Uganda and the low resilience of households, the poor were more
likely to use detrimental coping strategies, such as reducing food consumption,
which could have negative consequences for their human capital in the long run.
As a result, at least 50% of Ugandans remain vulnerable to the risk of falling back
into poverty in next two years. Education, health, and access to basic services are
crucial for building resilience and for equipping a fast-growing population with the
opportunities and skills needed to earn higher incomes. However, access to these
services still remains very unequal.

The study also examined telecommunication services, an increasingly important

factor in people’s lives and in income-earning prospects. Closing the digital
infrastructure gap stimulates economic growth and is especially relevant
given Uganda’s large population of youth. Yet the sector is held back by limited
competition, which gets in the way of making digital services more affordable for

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existing users and discourages take-up by new users, who are typically less well-
off.

2.3 Overview of Excluded/Vulnerable Populations

2.3.1 Smallholder Farmers
The agricultural sector is the largest employer in Uganda and it remains essential
to secure the livelihood of the Ugandan population according to the Annual
Agricultural Survey 2018. The survey confirms that the agricultural sector
ranks first in terms of labour force in the Uganda economy. Approximately 7.4
million households operate agricultural land and/or rear livestock. Within these
agricultural households, 81.2% of the adult members report to be mainly engaged
in agricultural activities.

Fig.2 Percentage engaged mainly in agricultural activities

The percentage of the household members engaged mainly in agriculture further

increases to 90 percent when focusing solely on the female agricultural population.
Agriculture represents an important employer for the youth although to a lesser
extent, with about 38 percent of the agricultural household members in the 15 to
30 years age class reporting ‘ agriculture’ as first occupation.

Around 80 percent of the agricultural households engage in crop and livestock

production both for own consumption and to generate income, while 9 percent of
the households declare to engage in those activities only for own consumption. As
such, agriculture remains backbone in securing subsistence and income to a large
portion of the population.

The survey also reveals that 39.6% of the adults (18+) living in agricultural
households are owners or right holders over the agricultural land they cultivate.
Such percentage gets as high as 48.7% among the men, while it goes down to
31.1% among the yet, women cultivate crops more frequently than men and for

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longer hours.

According to the Annual Agriculture Household Survey 2019 by UBOS, majority

of the agriculture household heads had attained a primary education as the
highest level (56.6%), an increase of approximately seven percentage points
from the result in in 2018 (50.1 percent) while 28.4% had attained a secondary
education and above and 14.7% had not attained any education. The percentage
of the agriculture household heads with no education declined from 24.9% in
2018 to 14.7% in 2019.

Disaggregation by sex shows that the proportion of female heads with no formal
education (36.4 %) was four times more than that of their male counterparts
(8.5%). The male heads who had attained a secondary education and beyond
(32%) were more than two times that for the female heads (14.9%) as shown in
the figure below:

Fig.3: Education Levels of Agriculture Households

Source :UBOS Annual Agriculture Survey 2019

In Uganda, access to agricultural credit by the rural community, where the majority,
over 80% are smallholder farmers, has remained very low and stagnating in the
range of 10%-20% in the last ten years as revealed in reports assessed by the
Economic Policy Research Center (EPRC) in their policy brief No.25. Analysis of
the Uganda Census of Agricultural survey data showed that at national level, only
11.3% of total 3.9 million agricultural households accessed credit . Of this, 61%
accessed credit through informal, 29% through semi-informal and 10% through
formal financial institutions.

The table below shows the sources of finance for the famers between the years
2018 – 2019:

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Fig.4: Sources of Credit for smallholder farmers

Source: Annual Agriculture Survey 2019

2.3.2 Refugees and Host Communities

Uganda is currently the largest-refugee hosting country in Africa, and the fifth
largest globally. More than 900,000 refugees have fled to Uganda from South
Sudan; nearly 450,000 hail from the Democratic Republic of the Congo (DRC);
51,000 are from Burundi; and the rest are from Rwanda, Somalia, and other
African countries.

According to a study conducted by U-Learn, UK Aid and CWG on financial services

for refugees in Uganda, levels of literacy in the refugee and host communities is
low. Nearly two- thirds of refugees (66%) and host community members (65%)
reported not being literate. When disaggregated by gender, (51%) of male refugees
report being literate — compared to only 25% of female refugees — and 40% of
male host community members — compared to 29% of female host community
members as shown in the figure below:

Fig.5: Proportion of respondents with basic literacy skills by gender

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The study further probed the digital literacy skills of the refugees and host
communities and the findings revealed that the majority of refugees and host
community members report being able to use basic phone functions — including
making and receiving calls and topping up airtime — but this proportion decreases
for more complicated tasks, with obvious implications for mobile money use.
While 90% of refugees and 93% of host community members report being able
to make or receive calls, these proportions drop to 68% and 81%, respectively,
for topping up airtime on mobile phones — a task that requires basic numeracy
and literacy skills but can be learned by illiterate individuals as shown in the figure
below:

Fig.6: Proportion of respondents by population group, reporting having select-

ed digital literacy skills

In terms of mechanisms of access/delivery channels for financial services, the

majority of refugee (64%) and host community (75%) respondents use mobile
money compared to other mechanisms. The study assessed feedback on
alternative delivery channels and below is the feedback that was obtained:

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When disaggregated by gender, the study shows that there’re less women who
operate mobile money accounts in both refugee and host communities as shown
in the figure below:

Fig.7: Proportion of Respondents with Mobile Money Accounts by Gender

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 THE STATE OF MICROFINANCE IN UGANDA 2023

Despite various efforts aimed at improving living conditions for refugees, in reality
there is still a barrier to integration, as evidenced by numerous anecdotal reports
supporting the perspective that a large proportion of refugees are still highly
dependent on the support of humanitarian agencies, and have yet to be able to
make progress towards self-reliance.

In general, social development has been limited as a result of the predominant

reliance on unstable subsistence farming activities (78% of the refugee population)
which contribute to entrenched vulnerability to poverty. According to the UN
Habitat 2020 study on the Nakivale refugee camp, the refugees are mostly using
their competencies and choosing the businesses they were engaged in before
albeit the fact that they are working in a different environment. Credit conditions,
lack of necessary documentation needed by financial institutions, lack of access
to financial loans was identified as a major challenge by the business community
in the refugee camps. This is made worse by the lack of access to capacity building
services that could enhance their skills and make them attractive to financial
service providers that can provide them with the much needed capital to build
viable and resilient enterprises thereby leading to self-reliance.

2.3.3 Gender
Economic empowerment of women is one of the most fundamental components
of achieving the Sustainable Development Goals. Inequality threatens long-term
social and economic development, harms poverty reduction and destroys people’s
sense of fulfillment and self-worth. Studies show that if women participated in the
economy identically to men in the world, it would add up to USD 28 trillion, or
26%, to annual GDP in 2025 compared with a business-as-usual scenario; and this
economic potential is highest in developing countries.

The Global Findex Database 2021 shows that the gap in access to financial
services between men and women dropped to 4% points for the first time in the
past decade. Worldwide, 78% of men now have an account, compared to 74% of
women. In developing economies, the gap is somewhat larger at 6 percentage
points (74% of men with an account compared to 68 % of women). Despite this
general trend toward narrowing gender gaps in developing economies, however,
barriers such as a lack of identification or a mobile phone, distance from a bank
branch, and low financial capability continue to hamper women’s ability to
participate in the formal financial system. These barriers may contribute as well
to the fact that women report low levels of financial resilience—meaning, they are
unable to easily come up with money to deal with an emergency within 30 days.
Programs aimed at expanding financial inclusion through the digitalization of cash

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payments can help increase both financial access and use in a way that improves
women’s lives.

Uganda has registered substantial improvement in digital financial inclusion, but

there are still significant challenges to overcome in ensuring inclusivity in the
transformation to a digital society especially for the Ugandan woman. An ongoing
study by EPRC, together with the African Economic Research Consortium (AERC),
points to the need to invest in gender-focused interventions to bridge the digital
divide between men and women in Uganda. Preliminary findings on the gender
digital financial divide in Uganda show a wide disparity between women and men
in the use of digital financial services, with females 30% less likely to use digital
financial transactions.

In developing economies, receiving a digital payment opens the door to

engagement with the broader financial ecosystem. According to the global findex

Fig.8. The figure below shows inflows and usage of digital payments by women
in developing economies

Source: Global Findex Database 2021.

Note: Inflows and usages are shown as percentages of the 32 percent of women receiving a payment into an account.

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database, 30% of women and 40% of men received a digital payment in the 12
months prior to the Global Findex 2021 survey. However, the types of payments
men and women received differed. For instance, 23% of men and 16% of women
in developing economies received wages into an account. This gender gap in wage
payment receipt is due, in part, to disparities in employment trends.

The findings on account access, use, and well-being collectively suggest the need
to continue efforts to increase equitable financial inclusion for women. These
efforts should be designed in a way that is mindful of women’s specific concerns
and needs. In Uganda, several initiatives aimed at increasing financial inclusion
have been implemented – infact, a new National Financial Inclusion Strategy
(2023 – 2028) has been designed. However, most of the interventions are gender
neutral with limited focus on increasing the percentage of women using digital
financial services. Also, studies have shown women struggle to meet the Know
Your Customer (KYC) requirements, limiting their access to digital financial
services. Easy access to national identity cards is important – women are usually
held back in domestic care work and cannot afford spending an entire day in the
queue to apply for the national ID, which is a permanent requirement to access
most digital services. As such, there is need for public investment in gender-
focused interventions to achieve inclusive digital financial inclusion.

2.3.4 Youth
There is increasing awareness that youth have potential to drive economic
growth. In many developing countries, youth are the largest and fastest
growing segment of the population. Still, young people face numerous barriers
to economic participation, from insufficient educational opportunities to
an absence of jobs when they transition out of school. With limited options
to generate income, young people, especially in developing countries, opt for self-
employment. However, their earnings potential is hindered by a lack of financing
tools to invest in their businesses and increase their incomes.

The persistent financial exclusion of youth has a negative impact on individuals,

communities and the broader economy. A strategic effort to enhance financial
inclusion for youth can make economies more dynamic and strengthen economic
resilience over the long term.

Providing young people with financial services—whether a safe place to save or

an appropriately structured loan for investment in an enterprise or education—
can promote entrepreneurship and asset building, and emphasize sustainable
livelihoods. The financial component is especially effective for youth when

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complemented with training in entrepreneurship and financial literacy, and

mentorship opportunities.

Few financial service providers (FSPs) such as banks, credit cooperatives or

microfinance institutions, do not understand and adequately serve the youth
market, and regulatory frameworks are not designed to be youth inclusive or
protective of youth rights. According to a fact sheet prepared by UNCDF on youth
financial inclusion;
• Youth are 33% less likely to have a savings account than adults and 44%
less likely to save in a formal institution
• Saving-account penetration rates for youth vary by geographical region,
ranging from 12% in Africa to 50% in East Asia and the Pacific
• Youth are often excluded from access to formal financial services. Reasons
include legal restrictions, high transaction costs and negative stereotypes
about youth. Regulatory frameworks and inclusive policies that are both
youth friendly and protective of youth rights are needed to increase youth
financial inclusion.
• Traditionally, FSPs have neglected youth or offered them services that
were not adapted to their characteristics and needs. However, over the
last five to ten years, an increasing number of initiatives from different do-
nors and non-governmental organizations are promoting youth access to
finance. These initiatives work through partnerships with FSPs and youth
serving organizations that share a long term vision for youth.

According to a report on youth inclusion regulatory framework by the Alliance

for Financial Inclusion (AFI), youth are not a homogeneous group. Young people
experience distinct life stages, first as adolescents with financial pressures
primarily related to their education and, later, as young adults when they are
under greater financial pressure to help support their household and eventually
their own family. These transitions are a defining feature of young people’s lives
and require nuanced approaches to regulations, financial products and other
support to ensure effective financial inclusion.

Financial products and services that could address youth needs are often out
of reach because regulatory frameworks and societal biases tend to favor
older, more stable population segments. Some of the same, often inadvertent,
regulatory and policy barriers that affect other vulnerable populations have a
strong impact on youth, who often lack resources and financial experience. These
hurdles are experienced more acutely by youth who are most vulnerable, such as

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persons with disabilities, rural residents, refugees and others. Even when financial
services are theoretically available, account ownership, usage and financial
literacy are generally low among youth. This creates a vicious cycle that inhibits
the development of financial capabilities and hinders economic potential from
generation to generation.

Lack of usage is often the result of regulatory and product design that overlooks
youth-specific demands and constraints. Young entrepreneurs struggle to
access credit due to information asymmetries common in developing countries,
inadequate credit bureaus and contract enforcement, and high collateral
requirements that young people can rarely meet. Young women are especially
disadvantaged due to additional cultural barriers that limit their mobility and
access to resources.

Although financial technology appears to be a promising tool for expanding the

outreach and increasing the uptake of formal financial services, digital financial
services (DFS) present new risks for the financial sector and young consumers.
An inclusive financial sector therefore requires supportive macro-level policies,
as well as incentives and technical support to build capacity, manage risk and
develop new product innovations that are truly accessible and ultimately used by
youth.

Overcoming barriers to exclusion and achieving successful youth financial

inclusion requires a multi-stakeholder approach that engages government
(including policymakers, regulators and line ministries), FSPs, youth serving
organizations and other youth stakeholders. Youth, of course, need to be at the
centre of this dialogue.

2.3.5 Persons With Disabilities

About 1.3 million people around the world live with significant disabilities
according to data from the World Health Organisation. This figure represents
16% of the world’s population. People living with disabilities are vulnerable to
exclusion and discrimination despite being an integral part of society. Managing
their own finances is oftentimes wishful thinking for People Living with Disabilities
(PLWD). A 2019 UN report cites data that show persons with disabilities consider
28% of banks in developed countries, and between 8% and 64% banks in some
emerging economies, to be inaccessible. It is therefore imperative to create an
inclusive society that can empower them to reach financial independence.

According to the Uganda national household survey, at least 4 out of every 25,

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 THE STATE OF MICROFINANCE IN UGANDA 2023

or 16% of the population, are disabled. Disabled people in Uganda, as in most

developing countries in the world, face extreme conditions of poverty, have
limited opportunities for accessing education, health, financial services, suitable
housing and employment opportunities.

AMFIU implements an economic empowerment programme for People living

with disabilities in collaboration with the Norwegian Association for the Disabled
(NAD) and the National Union of People with Disabilities (NUDIPU). Under this
programme, access to financial services for PLWDs has grown over the years and
the table below shows the PWLDs that have been reached by September 2023:

Table.2. Access to Finance for Persons With Disabilities, Indicators as at Sep-

tember 2023
No Item Value
1 Outstanding portfolio to PLWDs UGX. 1,692,281,805
2 Value of savings UGX. 1,405,642,209
3 Number of female customers 6,247
4 Number of male customers 4,849
Source: AMFIU iSave Q3 Program Report

Persons with disabilities face a lot of challenges in their quest to access financial
services. However, there are strategies and innovations that can foster financial
inclusion for them that may include among others:

i. Innovative Service Delivery

Leveraging technology, financial institutions can enhance financial inclusion for
persons with disabilities by developing and promoting assistive technologies,
such as screen readers, voice recognition software, and alternative input devices,
to make their digital platforms like mobile apps and websites more accessible. A
combination of physical constraints in accessing financial institutions and services
prevents many persons with disabilities from banking independently. Depending
on the type of disability, this includes being unable to travel to and enter a
financial institution, branch, or ATM, not perceiving and understanding what is
written on paper or electronic devices, being unable to hear, understand, and
communicate with banking service providers, and being unable to access paper
or digital content. Additionally, ensuring compatibility with assistive devices like
hearing aids or screen magnifiers is important. ATMs and documents should be
Braille enabled for the visually impaired.

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 THE STATE OF MICROFINANCE IN UGANDA 2023

ii. Institutionalizing disability Inclusion.

Financial institutions should make sustainable interventions so that the focus on
inclusive services for Persons with Disabilities is not periodic but rather integrated
into operational manuals and strategic documents, creating clear targets and
making deliberate adjustments is key to make this a reality.

iii. Financial Literacy

It is important to educate people with disabilities about finance. There should be
programmes that focus on saving, budgeting, debt management, and understanding
financial products and services. The information should be delivered in learning
techniques suitable for PLWD.

iv. Policy and Regulation

Governments can play a significant role in promoting financial inclusion by
enacting and enforcing policies and regulations that protect the rights of people
with disabilities. This may involve ensuring equal access to financial services,
prohibiting discrimination based on disability, and encouraging financial
institutions to adopt inclusive practices.

By implementing these strategies, financial institutions, governments, and

organisations can work towards greater financial inclusion for people living with
disabilities, enabling them to actively participate in the economy, make informed
financial decisions, and improve their overall quality of life.

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 THE STATE OF MICROFINANCE IN UGANDA 2023

3.0 OVERVIEW OF THE FINANCIAL SERVICES SECTOR

According to the global services global market report (2022) The global financial
services market grew from $25848.74 billion in 2022 to $28115.02 billion in
2023 at a compound annual growth rate (CAGR) of 8.8%. The Russia-Ukraine
war disrupted the chances of global economic recovery from the COVID-19
pandemic, at least in the short term. The war between these two countries has
led to economic sanctions on multiple countries, a surge in commodity prices, and
supply chain disruptions, causing inflation across goods and services and affecting
many markets across the globe. The financial services market is expected to grow
to $37484.37 billion in 2027 at a CAGR of 7.5%.

The financial services market includes revenues earned by entities by providing

financial or money related services such as lending, investment management,
insurance, brokerages, payments, and fund transfer services. The financial services
industry is categorized on the basis of the business model of the firms present in
the industry, and most firms offer multiple services.

As of April, 2023, global growth is projected to fall from an estimated 3.4 percent
in 2022 to 2.8 percent in 2023, then rise to 3.0 percent in 2024 due to “surprisingly
resilient” demand in the United States and Europe, an easing of energy costs and
the reopening of China’s economy after Beijing abandoned its strict COVID-19
restrictions.

Global inflation is expected to fall from 8.8 percent in 2022 to 6.6 percent in
2023 and 4.3 percent in 2024, still above pre-pandemic (2017–19) levels of about
3.5 percent4. This is driven by the appreciation of the US-dollar against major
currencies, lower foreign exchange reserves and delayed pass-through of higher
energy and commodity prices.

3.1 Global Microfinance Trends

According to the Impact Finance Barometer report 2022, The global microfinance
sector showed signs of improved growth in 2021 compared to the slow down
observed in in 2020. For example, the medium growth in gross loan portfolio (GLP)
at the microfinance level was 5.9 times higher in 2021 (11.8%) than 2020 (2.0%)
In dollar terms, MFIs managed a total gross loan portfolio of USD 187.3 billion
with the top 100 MFIs remaining the sector’s dominant players accounting for
69.4% of total GLP.

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 THE STATE OF MICROFINANCE IN UGANDA 2023

The sector has also continued to grow in terms of number of borrowers increasing
to 156.1 million in 2021. This reflects an increase of 5.0% at the MFI level, which is
closer to the annual pre pandemic growth rates observed in 2017-2019 (6-10%).
In terms of demographic composition female clients make 53% of MFI borrowers.

Fig.9. Gross loan portfolio and number of female borrowers.

According to the 60 Decibels Microfinance Index survey report 2023 the top
114 financial service providers came from 32 countries in Asia, Africa, and Latin
America, a 58% increase from last year’s data (72 FSPs). Almost half of these FSPs
(48%) are Non-Banking Financial Institutions/Corporations, and Banks or Credit
Unions/Cooperatives account for nearly a quarter (24%). About a third (32%) of
the FSPs offer only loan services, while the rest offer a blend of financial services,
most notably savings and insurance. 71% of FSPs in our sample offer non-financial
services like education and training, free of charge, to clients.

Fig.10. Type of Financial Institutions in Africa, Asia and Latin America.

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 THE STATE OF MICROFINANCE IN UGANDA 2023

Fig.11. Financial Services Offered in Africa, Asia and Latin America.

From the report it was indicated that globally there were more female borrowers
compared to male borrowers however in terms of lending methodology individual
lending had more borrowers compared to group lending.

Fig.10. Gender and Lending Methodology.

Furthermore the research indicated how clients who have been with their service
providers for a period >2 years were able to say how their lives have improved
compared to those who had stayed with them for a shorter tenures ≤2 years.

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 THE STATE OF MICROFINANCE IN UGANDA 2023

This difference also plays out with other household outcomes: about 25% of
longer-tenured clients report significant improvement in their spending on home
improvements, eating better quality and quantity of meals at home, and increased
spending on their children’s education. This compares to 20% of shorter-tenure
clients reporting similar improvements.

The data also revealed that longer-tenured customers are more likely to report
resilience to financial shocks. Nearly 3 in 10 longer-tenure clients report
significant improvement in their ability to face an emergency expense because
of their financial service provider, compared to 2 in 10 shorter-tenured clients.
The compounded benefits of long-term associations are evident across various
household metrics, and reveal the transformative power of longer engagement
with FSPs.

Fig.11. Impact of Loans on individual, Business and Household Outcomes by

Tenure

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 THE STATE OF MICROFINANCE IN UGANDA 2023

The report also showed that clients who accessed additional services beyond
loans only had stronger individual, business and household outcomes.

At the individual and household level, clients who access both non-financial and
financial services in addition to their loan from the FSP are more likely to report
very much improved quality of life (53% of those who accessed both vs. 31% who
accessed only credit), increased savings balance (36% vs. 16%), ability to manage
finance (48% vs. 28%), and confidence in their abilities (53% vs 32%)

The trend is similar for business-level outcomes, where 44% of clients who access
both additional services are more likely to report ‘very much increased’ income
compared to 25% of clients who access only credit

Fig.12. Impact of Individual, Business and Household Outcomes by use of addi-

tional Services.

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 THE STATE OF MICROFINANCE IN UGANDA 2023

The differences for clients who accessed only non-financial additional services
or only financial additional services are lesser than those who access a mix of
additional services, but still significant when compared to those who accessed
credit only.

These findings support the notion that offering additional services beyond
credit to clients—bundled or unbundled— and when clients use them, individual,
business, and household outcomes significantly improve.

Fig.13. Impact on Individual, Business and Household Outcomes by Use of Addi-

tional Services

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 THE STATE OF MICROFINANCE IN UGANDA 2023

3.2 Overview of the Financial and Insurance Services Sector in Ugan-

da
Uganda’s national financial system comprises of financial institutions (formal,
semi-formal and informal), financial markets, and the payment systems, which
together enable the exchange of goods and services and the allocation of capital.
The formal financial institutions include Commercial Banks, Microfinance Deposit-
taking institutions, Credit Institutions as well as Non Deposit taking Institutions
and SACCOs.

The financial and insurance services sector declined by 1.5 percent in FY 2022/23,
from 4.5 percent growth registered in FY 2021/22. In nominal prices, the activity
recorded a value addition of UGX 5,069 billion in FY 2022/23, compared to UGX
4,659 billion in FY 2021/22 with an overall contribution to GDP of 2.8 percent in
FY 2022/23, down from 2.9 percent in FY 2021/22.

According to data released by the Insurance Regulatory Authority (IRA), the

insurance industry maintained its growth trend by the end of December 2022. The
industry’s total value increased from UGX 1,183.86 billion in 2021 to UGX 1,438.79
billion in 2022, reflecting a growth rate of 21.5 percent during the reporting
period. Non-life insurance business experienced a growth of approximately 21.8
percent, generating UGX 896.55 billion in 2022 compared to UGX 736.09 billion
in 2021. On the other hand, life insurance business generated UGX 501.74 billion,
increasing from UGX 351.3 billion in the third quarter of 2022, which represents
a growth rate of 26.3 percent for that segment in the full year when compared to
2021.

According to the MoFPED, Perfomance of the Economy Report, 2023 a major part of
the FY 2022/23 was characterized by heightened uncertainty about the economic
outlook largely underpinned by the grim global economic environment which had
only just begun to recover from the COVID-19 pandemic and then heightened
by the Russia-Ukraine conflict and its adverse spill-overs on international prices
and global output. Nonetheless, the BoU, within its mandate, took appropriate
actions to moderate the likely impact of these disruptions on the performance of
Supervised Financial Institutions (SFIs) in particular, as well as the wider financial
system.

Since last reporting, the COVID-19 Liquidity Assistance Program (CLAP) for
managing potential liquidity risks arising from the pandemic as well as the
restriction on payment of dividends and other discretionary distributions of SFIs

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 THE STATE OF MICROFINANCE IN UGANDA 2023

expired on May 31, 2022. The BoU also phased out the remaining targeted credit
relief measures for the education and hospitality sectors on September 30, 2022.
Credit risk remained a concern in the near term due to rising lending interest
rates amidst a slow economic recovery. There were signs that global and domestic
macroeconomic conditions were starting to improve. However, the implications
of tightening of monetary policy on financial institutions were yet to fully emerge.
On aggregate, Uganda’s SFIs held strong liquidity and capital buffers to withstand
ongoing shocks.

In addition, there was an increase in SFIs’ minimum paid-up capital. Pursuant to

the Financial Institutions Act (Revision of Minimum Capital Requirements), the
deadline for the first phase of the capital increment was December 31, 2022. For
this first phase, commercial banks, credit institutions, and MDIs were required to
increase their minimum capital to at least Ushs. 120 billion, Ushs. 20 billion, and
Ushs. 8 billion, respectively.

3.3 Structure of the financial Services Sector

In Uganda, financial Institutions continue to be categorized under four tiers i.e.
Commercial Banks for Tier 1, Credit Institutions for Tier 2, Microfinance Deposit
Taking Institutions for Tier 3 and Non deposit Taking Institutions and SACCOs for
Tier 4.

3.3.1 Commercial Banks

The commercial banking sector in Uganda is regulated by the commercial bank
under the Financial Institutions Act 2016 (ask Robert of the current act). Currently,
26 commercial banks are licensed and regulated by Bank of Uganda as shown in
the list below.

Table.3. List of Commercial Banks in Uganda

No Name of Commercial Bank
1 ABC Capital Bank Uganda Limited
2 Afriland First Bank Uganda Limited
3 Bank of Africa Uganda Limited
4 Bank of Baroda Uganda Limited
5 Bank of India Uganda Limited
6 ABSA Bank Uganda Limited
7 Cairo International Bank limited
8 Centenary Rural Development Bank Limited
9 Citibank Uganda Limited

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 THE STATE OF MICROFINANCE IN UGANDA 2023

No Name of Commercial Bank

10 Commercial Bank of Africa Uganda Limited
11 DFCU Bank Limited
12 Diamond Trust Bank Uganda Limited
13 Ecobank Uganda Limited
14 Equity Bank Uganda Limited
15 Exim Bank Uganda Limited
16 Finance Trust Bank Uganda
17 Guaranty Trust Bank Uganda Limited
18 Housing Finance Bank Uganda Limited
19 KCB Uganda Limited
20 NC Bank Uganda Limited
21 Opportunity Bank Uganda Limited
22 Post Bank Uganda Limited
23 Orient Bank Limited
24 Stanbic Bank Uganda Limited
25 Standard Chartered Bank Uganda Limited
26 Tropical Bank Limited
27 United Bank for Africa Uganda Limited
w
In the year to March 2023, the banking sector registered a growth of Ushs. 3.5
trillion or 8.1 percent in total assets from Ushs. 42.5 trillion in March 2022 to
Ushs. 45.92 trillion in March 2023. This growth was, however, slightly lower than
UGX.4.1 trillion or 10.8 percent registered in the twelve (12) month period to
March 2022. The deposit base grew by Ushs. 2.5 trillion or 8.4 percent from Ushs.
29.5 trillion to Ushs. 32.0 trillion over the same period.

The banking sector has remained resilient to shocks due to liquidity buffers as
well as the interventions by the Bank of Uganda. In a bid to further strengthen the
banking sector’s capital position and reduce the impact of shocks on banks from
the risks in the global economy, BoU implemented the revised capital adequacy
requirements effective December 31, 2022.

3.3.2 Credit Institutions (CIs)

In Uganda there are four Credit Institutions, regulated by the Bank of Uganda
under the Financial Institutions Act 2016 as shown in the table below:

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 THE STATE OF MICROFINANCE IN UGANDA 2023

Table.4. List of Credit Institutions

No Name of Credit Institution
1 Brac Uganda Bank Limited
2 Mercantile Credit Bank Limited
3 Top Finance Bank
4 Yako Bank Uganda Limited

The aggregate core and total capital held by the CIs subsector increased by 39.3
percent and 37.6 percent, respectively, from Ushs. 43.6 billion and Ushs. 46.5
billion as at March 31, 2022 to Ushs. 60.7 billion and Ushs. 63.9 billion as at March
31, 2023, respectively. Consequently, the aggregate core and total capital to risk-
weighted assets ratios increased from 13.4 percent and 14.3 percent as at March
31, 2022 to 16.9 percent and 17.8 percent, respectively, as at March 31, 2023.

3.3.3 Microfinance Deposit-Taking Institutions (MDIs)

The Microfinance Deposit Taking institutions (MDIs) are regulated by Bank of
Uganda under the under the MDI Acted 2003, amended 2023 to allow for agent
banking, Islamic banking and Bancassurance. Currently, there’re four MDIs
operating in Uganda as shown below:

Table.5. List of Micro Deposit Taking Institutions.

No Name of Institution
1 EFC Uganda Limited
2 FINCA Uganda Limited
3 Pride Microfinance Limited
4 UGAFODE Microfinance Limited

The MDIs have a total capital of UGX 113,518,191,260 and total assets of UGX
760,544,515,[Link] Microfinance Deposit-Taking Institution (Registered
Societies) Regulations, 2021 were finalized and gazetted in 2022. These regulations
will guide licensing, regulation, and supervision of registered societies (the Large
SACCOs) by the Bank of Uganda in accordance with its mandate derived from
Section 110 of the Tier IV Microfinance and Money Lenders Act, 2016.

3.3.4 Tier IV Institutions

The Tier 4 financial institutions majorly aim at serving the bottom of the pyramid
and include; Non-deposit taking microfinance institutions, Savings and Credit
Cooperatives (SACCOs), savings groups and money lenders. These remain some

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 THE STATE OF MICROFINANCE IN UGANDA 2023

of the fastest growing and dynamic components of Uganda’s financial sector.

Their wide geographical coverage and countrywide presence is ideal for providing
financial services to the large unbanked population with low incomes that would
otherwise be excluded from the formal financial sector.

The Tier 4 financial institutions are regulated by the Uganda Microfinance

Regulatory Authority (UMRA) under the Tier4 Microfinance institutions and
money lenders act. Since 2018, UMRA has witnessed an increasing trend in the
number of institutions that are licensed under its regulatory ambit which are
contributing to social economic transformations of Uganda’s economy through
job creation, providing access to credit and this has led to an increase in financial
inclusion. By April 2023, institutions licensed by UMRA stood at 1,513 as indicated
below:

Table.6. List of UMRA Licensed Institutions

Source: UMRA as at April 2023

In the coming FY 2023/24, UMRA will aim at strengthening the supervision of

institutions under its jurisdiction through;
i. Rolling out a robust Information Management system to increase efficien-
cy in delivering the mandate.
ii. Strengthening the Credit information sharing Mechanism.
iii. Popularization of the Self-Help Groups Guidelines.
iv. Strengthening the complaints resolution mechanism.
v. Prepare for licensing and supervising of EMYOOGA and Parish Develop-
ment Model SACCOs.
vi. Enforcement of Standards and compliance requirements for all Tier 4 Mi-
crofinance Institutions and Money Lenders under UMRA.
vii. Undertake consumer education and financial literacy awareness cam-
paigns through UMRA consumer protection guidelines.

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 THE STATE OF MICROFINANCE IN UGANDA 2023

3.4 Developments in the financial services in Uganda

3.4.1 The Credit Reference Bureaus (CRBs)
Bank of Uganda regulated and supervised financial institutions continue to
embrace the use of credit reports from the CRBs in their loan appraisal process in
a bid to improve the quality of loans advanced. By 31st March 2023, 33 financial
institutions accessed CRB services, through 607 branches connected to CRB
services.

The Financial Institutions (Credit Reference Bureau) Regulations, 2022 intended

to expand access to Credit Reference Services to other non-regulated credit
providers were gazetted on September 30, 2022. Effective January 1, 2023, all
credit applications of Ugandan citizens reported to the CRBs were required to
have a National Identification Number (NIN) as the primary unique identifier while
a combination of a refugee number or passport number or work permit number
is required for Non-Ugandans until the National Identification and Registration
Authority (NIRA) starts issuing Alien Identification Numbers.

The number of registered borrowers (clients) who had financial cards increased
to 2.36 million as at end of March 2023 compared to 2.2 million financial card
holders as at end of March 2022 representing a 7.3 percent increase. Similarly, the
number of credit inquiries made by SFIs to CRBs increased by 35.3 percent from
1.02 million as at end of March 2022 to 1.38 million as at end of March 2023. The
average processing time for data requests for the CRBs from SFIs is in seconds or
in real-time.

The average number of registered borrowers with NINs across the three licensed
CRBs stood at 1,939,772 as at end of March 2023 compared to an average of
1,562,890 as at end of March 2022. Supervised Financial Institutions continue to
update the profiles of both individual and non-individual borrowers with existing
unretired facilities, with the applicable unique identifier or registration number as
prescribed by BoU.

3.4.2 Agricultural Insurance

The Uganda Agriculture Insurance Scheme (UAIS), through the Government of
Uganda has since its inception in FY 2016/17 been implemented and will continue
to operate until FY 2024/25. The scheme is currently being implemented by
Agro Consortium (U) Limited, which is a secretariat that consists of thirteen (13)
insurance companies offering the following specific products: multi-peril crop
Insurance, Livestock, Weather Index, Poultry, Apiary, Forestry and Aquaculture

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 THE STATE OF MICROFINANCE IN UGANDA 2023

Insurance.

The main objective of the scheme is to cushion farmers from losses associated with
risks arising from climate and environmental changes that pose a high threat to
farmers’ livelihoods and business growth altogether. The scheme also facilitates
access to credit from various financial institutions, whose confidence is bolstered
by the de-risking framework of the scheme, especially small holder farmers. Loan
repayment by the farmers remains guaranteed as the activity is protected in case
of loss pertaining to covered perils.

Under the scheme, the government provides premium subsidy funds, in

collaboration with industry players who endeavor to undertake behavioural
change efforts through education, sensitization and training of farmers.

By December 2022, the most significant impact of loss suffered was from drought
which contributed to 73.8 percent of all the insurable risks. This has led to the
emphasised promotion of the Weather/Drought Index Insurance product.

By the end of December 2022, total claims pay-out stood at Ushs.32.6 billion,
and written premiums amounted to Ushs.84.9 billion. Cumulatively by the end of
December 2022, the scheme had provided cover for over 665,240 farmers across
all regions of the country. A considerable number of small-scale farmers are
covered under weather index insurance whereas large-scale farmers are covered
under the traditional multi-peril crop insurance.

3.4.3 E-Money
E-money has continued to post an upward growth trajectory. This is largely
attributed to the licensing of more e-money issuers and the central bank-led public
campaigns on e-payments. As at March 31, 2023, twenty five (25) institutions had
received licenses under the National Payment Systems regulatory framework, of
which eleven (11) payment service providers were licensed as e-money issuers.
The growth is also on account of the introduction of new e-money use cases and
innovative payment solutions which seem to be gaining traction. These include
public sector transport, savings and investment solutions. In addition, the rising
cost of living seems to have occasioned the masses into frugal behaviour and use
of digital channels to send money.

As at March 31, 2023, the registered number of customers stood at 41.7 million, up
from 36.9 million in April 2022 reflecting a 13.1 percent increment. However, the
ratio of active 56 to registered customers posted modest growth, rising from 16.5

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 THE STATE OF MICROFINANCE IN UGANDA 2023

percent in April 2022 to 25.1 percent in March 2023, indicative of a reasonable

number of users who hold inactive e-money wallets.

Notwithstanding the above developments, there remains concerns with regard to

digital fraud. Accordingly, during the year, BoU issued cyber security guidelines as
well as guidelines on the annual systems vulnerability assessments as a measure
to address the increased cases of digital fraud. These initiatives are expected
to strengthen the risk management frameworks and internal controls among
payment service providers. Additionally, it is anticipated that the ongoing efforts
to build digital literacy will address the human factors which remain a major
vulnerability exploited by digital fraudsters. Other interventions have been
proposed for inclusion under the second national financial inclusion strategy
which is under development.

Table.7. Mobile Money Service Segment Evolution: April 2020 to April 2023

Source: Bank of Uganda

Mobile Money Transaction rate in Uganda.

From the International Monetary Fund report, mobile money transactions have
been steadily increasing from 2010 up to 2020 when the report was produced.

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 THE STATE OF MICROFINANCE IN UGANDA 2023

3.4.4 Digitalization.
Digitization has been a source of hope and frustration in the microfinance industry
hope because it is seen as the means to make microfinance institutions (MFIs)
competitive and frustration because few digitization initiatives have transformed
the traditional MFI model despite the significant resources invested.

CGAP argues that it is in the interest of the microfinance industry and the broader
financial inclusion community to generate value for customers and businesses
through digitization. MFIs play a vital role in delivering credit and other financial
services to low-income customers, including closing the financing gap for micro
and small enterprises (MSEs) estimated at nearly US$5 trillion globally.

CGAP’s early findings about what contributes to the success or failure of

digitization involved combining the most successful practices found in their
research and testing them through practical implementation. As a result, they
proposed five core principles for successful digital implementation:
1. Deploy agile product development teams to drive the digital implemen-
tation. The product team develops the product concept into operational
and commercial form through a process of iterative testing and takes the
product to market. Management delegates authority to the product team
to lead the action and provides the resources and support needed for it to
be successful.
2. Define and measure the expected value to be generated from the digital
implementation. Use clear metrics for measuring how value is created for
the customer and the company. Develop the business intelligence capacity
to track the customer behavior change associated with value creation.
3. Prioritize the product features that create value. Use customer research
and business case analysis to identify product features that generate
customer and business value. Prioritize those features on the product
roadmap in a sequence of product development tests that prove the con-
cept before scale-up.
4. Prototype and test solutions with simple technology. A Minimum Viable
Product approach streamlines implementation, contains cost, and mini-
mizes technology and data challenges during the initial product tests.
5. Design for a good user experience for staff and customers. Customer and
staff satisfaction are the primary drivers of product adoption and value
creation. The customer experience drives customer adoption, while the
staff user experience is a key driver of internal change management.

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 THE STATE OF MICROFINANCE IN UGANDA 2023

4.0 PERFORMANCE ANALYSIS

4.1 Portfolio and Outreach

From the table below, the outstanding portfolio of the reporting institutions
is totaling to UGX 2.27 Trillion with 1,061,861 borrowers and 54% of these as
women. Non-deposit taking MFIs had the highest number of borrowers and the
highest number of women.

These institutions had total voluntary savings of UGX 787Bn with a total asset
value of 7.76 trillion as shown in table 8 below.

Table.8. Portfolio and Outreach

Outstanding portfolio Total borrowers Female borrowers Voluntary savings Total assets
MFIs 389,077,555,763 360,884 229,616 0 231,877,421,705
Saccos 441,641,017,805 220,437 90,379 125,559,962,690 459,379,919,447
MDIs 459,399,684,549 123,520 47,094 110,349,439,450 760,544,515,829
Banks & CIs 989,226,023,662 357,020 209,092 551,154,488,548 6,309,106,532,281
Totals 2,279,344,281,779 1,061,861 576,181 787,063,890,688 7,760,908,389,262

4.2 Categories of Reporting Institutions

According to the pie chart below, the highest percentage of reporting institutions
is SACCOs with 54%, followed by MFIs with 40%, Banks and MDIs share the same
composition of 3% and Credit institutions by 1%.

Fig.14. Category of reporting Institution.

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 THE STATE OF MICROFINANCE IN UGANDA 2023

4.3 Category of Institutions by Location

The Central Region

In Central region, non-deposit taking MFIs have a higher concentration compared
to the rest of the categories. As shown below, (59%) are non-deposit taking MFIs,
(28%) are SACCOs, (6%) are MDIs and Banks.

Fig.15. Category of reporting Institutions in the Central Region

Western Region.
As shown below, majority of the institutions located in Western Uganda are
SACCOs (71%) followed by non-deposit taking MFIs with (10%), MDI and Bank
branches at (8%) and Credit institutions at (same composition of MDIs and Banks
and least with Credit Institutions’ branches at (1%).

Fig.16. Category of Reporting Institutions in Western region.

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 THE STATE OF MICROFINANCE IN UGANDA 2023

Northern Region
In the Northern region, the bank branches, MDI branches and SACCOs have the
same location spread with (27%), followed by the non-deposit taking MFIs with
(13%) and the Credit institutions at (7%) as shown below.

Fig.17. Category of Institutions in the Northern Region.

West Nile Region.

In the West Nile region, majority of the institutions (50%) are SACCOs, followed
by Bank and MDI branches at (17%), non-deposit taking MFIs at (13%) and Credit
Institutions’ branches at (4%) as shown below.

Fig.18. Category of Institutions in West Nile Region

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Eastern Region
As shown from the diagram below, majority of the institutions operating in
Eastern Uganda are SACCOs, MDI and bank branches at (29%) followed by the
credit institutions and non-deposit taking MFI branches at (7%).

Fig.19. Category of financial institutions in Eastern Region.

4.4 Outstanding Portfolio by Regions

In terms of outstanding portfolio and borrowers, the Central region has the
highest outstanding portfolio with the highest number of borrowers. However,
this also includes the portfolio of the branches that may be located outside the
central region. The Central region is followed by the Western region, West Nile,
Eastern region and then northern region as shown in the table 9 below.

Table.9. Outstanding Portfolio by Regions.

Region Outstanding Portfolio No of Borrowers
Central Region 1,854,658,876,040 757,398
Eastern Region 21,145,328,227 65,459
Western Region 343,427,951,372 171,249
Nothern Region 9,886,634,694 33,594
West Nile Region 50,225,491,446 34,161
Total 2,279,344,281,779 1,061,861

4.5 Profitability Indicators.

Profitability indicators measure the efficiency with which the financial institution
uses its resources to generate returns. They also reflect the institution’s ability to

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continue operating and grow in the future. The main ratios prioritized here include
Operating Self Sufficiency, Financial self-sufficiency, Portfolio yield, Return on
assets and Return on equity.

4.5.1 Operating Self Sufficiency Ratio

Operating self-sufficiency measures how the financial institution is able to meet
its expenses using income generated from its operations. When an institution
achieves beyond the breakeven point of 100%, it is considered to be self-sufficient.
However, the period in existence also matters as institutions that have existed
beyond five years should be able to register a relatively higher score than others
that have stayed less than this.

MDIs and SACCOs have registered a steady progress for the three consecutive
years and by close of September 2023, they had (110.5%) and (133.2%) respectively
compared to MFIs that had declined to (108.8%) compared to the previous years
as shown below.

Fig.20. Operating Self Sufficiency Ratio

4.5.2 Portfolio Yield.

The portfolio yield indicator shows how much income, fees and other incomes
a financial institution is able to generate from its portfolio. A higher portfolio
yield on the other side may not necessarily indicate a good yielding portfolio but
may also indicate that a financial institution imposes high interest and fees on its
portfolio and vice versa. The industry benchmark for this indicator for MFIs and
SACCOs is ≥42%.

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By the end of September 2023, both MFIs and SACCOs had registered healthy
ratios of 60.83% and 50.71% respectively as shown below.

Fig.21. Portfolio Yield

4.5.3 Return on Assets

The return on assets ratio presents the income a financial institution is able to
generate from the utilization of its assets. A low ratio indicates inefficient use of
the assets whereas a higher one indicates efficient use.

The MDIs scored (0.13%) ROA which is below the industry benchmark of 5%
and above, whereas MFIs had (3.7%) and SACCOs (9.2%) which are all below the
industry benchmark of 15% as shown below.

Fig.22. Return on Assets

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4.5.4 Return on Equity

Return on Equity Calculates the rate of return on the average equity for the period.
It is calculated by dividing net income (after taxes and excluding any grants or
donations) by period average equity. ROE is a measure of paramount importance
since it measures the return on their investment in the institution. According to
the graph below by Q3 SACCOs had the highest ROE of 22.13% followed by MFIs
with 11.52% and MDIs with 8.26%.

Fig.23. Return on Equity

4.6 Portfolio Quality Ratios.

4.6.1 Portfolio at Risk 30 days
Portfolio at risk 30 days indicates the balance of loans outstanding that have a
payment past due more than thirty days as a percentage of gross loan portfolio.

The industry benchmark for PAR 30 days for MFIs and SACCOs is ≤3% whereas
MDIs are recommended at ≤2%. By end of September 2023, MDIs achieved a PAR
30 days of 3.17% followed by MFIs at 9.61% and the SACCOs with 13.71%. All
these scores were below the industry standard as shown in the table below.

Table.10. Portfolio at Risk 30 days

Year MDIs MFIs SACCOs
2023 3.17% 9.61% 13.71%
2022 1.69% 11.47% 14.27%
2021 3.50% 11.02% 18.98%

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4.6.2 Risk Coverage Ratio

The risk coverage ratio shows how much of the financial institution’s portfolio at
risk is covered by the loan loss reserve. The industry benchmark for MDIs is 100%
and above whereas MFIs and SACCOs should cover above 120%. For this period,
MDIs covered (74.3%), the MFIs covered (64%) while the SACCOs could cover
(56.28%). None of the categories was within the required standard.

Fig.24. Risk Coverage Ratio

4.6.3 Loan Loss Ratio

The loan loss ratio compares how much of the portfolio has been written off
compared to the total gross portfolio in a given period of time. The loan loss ratio
is recommended to be at ≤1. At the end of the period, SACCOs had a loan loss ratio
of (0.61%), the MFIs stood at (1.13%) and the MDIs at (6.17%) as shown below.
This could also be because SACCOs rarely write-off bad loans.

Fig.25. Loan Loss Ratio

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4.7 Capital Ratios

4.7.1 Debt to equity ratio
The debt to equity ratio measures how much of the safety cushion in form of
equity is available to absorb losses before the lender is put at risk. According to
the industry standard, MDIs are recommended to acquire debt not exceeding 4
to 6 times their total equity, MFIs not exceeding 2 to 3 times their equity whereas
SACCOs it should be equal or less than 1 of total equity.

According to the graph, MDIs scored 2.5, 2.31 for MFIs and 1.74 for SACCOs. For
the MDIs and MFIs, these were healthy scores whereas for the SACCOs, this was
slightly high by 0.74% as shown below.

Fig.26. Debt to Equity ratio

4.7.2 Capital Adequacy ratio

A financial institution’s ability to cover losses expected and unexpected is referred
to as capital adequacy. A safety cushion is required to protect the deposits and
ensure stability of a financial institution. SACCOs are recommended to have a
capital adequacy ratio of ≥30% while that od MFIs is set at ≥ 50%.

From the graph below, all institutions performed within their industry standards
thus scoring a healthy capital adequacy ratio.

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Fig. 27. Capital Adequacy ratio

4.7.3 Cost of Funds Ratio

The cost of funds ratio shows the rate at which a financial institution acquires debt
and all other liabilities. The current standard recommends SACCOs and MFIS to
acquire debt not exceeding 15%. By end of September 2023, MDIs averaged at
(9.90%), MFIs at (11.47%) and SACCOs at (11.24%) as shown below.

Fig.28. Cost of Funds Ratio

4.8 Efficiency and Productivity Ratios

4.8.1 Operating Cost Ratio (OCR)
OCR measures the operating expenses in relation to the institution’s average
portfolio. It compares the recurrent expenses in relation to the volume of the
business (portfolio). The industry benchmark for MDIs is <60% whereas for MFIs
and SACCOs older than 3 years, it is at <20%.

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By the end of September 2023, MDIs scored a healthy ratio of 34.06%, MFIs and
SACCOs scored on average 45.11% and 34.52% respectively which is not within
the standard as shown below.

Fig.29. Operating Cost ratio

4.8.2 Average Loan size

According to the table below, MDIs had the highest average loan size of 3,719,233
followed by Banks and Credit institutions with 2,770,786, SACCOs with 2,003,479
and MFIs with the least loan size of 1,078,123.

Note: For Banks and Credit Institutions only portfolio under microfinance has
been considered.

Category of financial Institution Average Loan Size

Banks & Credit Institutions 2,770,786
MDIs 3,719,233
MFIs 1,078,123
SACCOs 2,003,479

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5.0 ENVIRONMENT SOCIAL AND GOVERNANCE (ESG)

5.1 Introduction
Globally, organisations are recognizing that a strategic, corporate-wide approach
to ESG can create meaningful value on many dimensions. ESG refers to a set of
criteria that investors and companies use to evaluate the environmental, social, and
governance aspects of a business/institution. These factors provide a framework
for assessing the broader impact and sustainability of an organization beyond
just financial performance. They represent a multi-dimensional framework that
has gained significant traction in the realm of investing and corporate decision-
making. “ESG” stands for “Environmental, Social, and Governance,” and each of
these components carries specific considerations as explained below.

Environmental factors encompass a company’s practices in relation to issues

like carbon emissions, resource usage, environmental conservation and general
efficiency at using the planets Natural Capital. Environmental considerations,
zeroes in on an organisation’s interactions with the natural world. This involves
scrutinizing the organization’s carbon footprint, waste management practices,
resource consumption, products offered and efforts towards environmental
conservation. Companies committed to environmental sustainability often seek
to minimize their negative impact on the planet by adopting practices like reducing
emissions, embracing renewable energy sources, considering environmental
impact when making financing decisions and implementing efficient waste
reduction strategies. Such actions not only align with global environmental goals
but also enhance long-term resilience against environmental risks.

Social aspects delve into how a company interacts with its employees, communities,
and stakeholders, focusing on issues such as diversity, labor practices, social
impact, customer welfare and livelihood and community engagement. In short,
how it creates (or destroys) social value. Organisations with strong social standing
prioritize fair treatment of employees and customers, promote diversity across all
levels, engage responsibly with local communities, and uphold human rights within
their operations and supply chains. These endeavors not only foster positive
public perception but also foster stronger bonds with employees, customers, and
communities, ultimately bolstering business stability.

Governance pertains to an organisation’s internal structure, leadership quality,

diversity, inclusion and transparency in decision-making. It encompasses

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elements such as board composition, executive compensation, transparency,

and overall management quality. Effective governance ensures that a company
operates ethically, mitigates conflicts of interest, and maintains accountability to
its stakeholders.

5.2 Advantages of Investing in ESG

Integrating ESG principles into an organisation’s operations goes beyond financial
performance, impacting reputation, resilience, and long-term viability. Specifically,
it can culminate into the following advantages:

Enhanced Reputation and Brand Value: Embracing ESG practices can bolster
a company’s reputation as a responsible corporate citizen. Demonstrating
commitment to environmental stewardship, social responsibility, and ethical
governance resonates with consumers, investors, and employees, potentially
attracting loyal stakeholders and boosting brand loyalty.

Access to Responsible Capital: The ESG movement has prompted a surge in

investment funds and institutions that prioritize companies with strong ESG
profiles. Businesses aligned with ESG principles may find it easier to access capital
from these sources, enabling expansion, innovation, and sustainable growth.

Risk Mitigation: By addressing ESG issues, businesses can identify and manage
potential risks more effectively. Proactively managing environmental and social
risks, such as regulatory non-compliance or supply chain disruptions, can protect
a company from financial and reputational damage.

Innovation and Efficiency: ESG considerations can drive innovation by pushing

companies to develop environmentally friendly products, streamline operations
to reduce waste, and explore sustainable business models. This can lead to cost
savings and increased operational efficiency.

5.3 Why are ESG Reports Important?

ESG reports play a vital role in the modern business landscape for several reasons:

Transparency: ESG reports offer transparency into an organisation’s operations

and practices related to sustainability and responsibility, allowing stakeholders to
make informed decisions.

Risk Management: ESG reports help identify and manage potential risks associated

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with environmental and social issues, enabling companies to proactively address

vulnerabilities.

Investor Decision-Making: Investors increasingly consider ESG factors when making

investment decisions. ESG reports provide valuable insights for investors seeking
to align their portfolios with their values and risk preferences.

Stakeholder Engagement: ESG reports facilitate effective communication with

stakeholders, including customers, employees, regulators, and communities, by
demonstrating a company’s commitment to positive impact.

Competitive Advantage: Organisations with strong ESG performance can gain a

competitive edge by attracting responsible investors, customers, and talent who
prioritize sustainability.

Long-Term Sustainability: Focusing on ESG factors helps organisations align their

strategies with long-term sustainability, contributing to their resilience and
success in an evolving global landscape.

However, ESG reports need not be so complex. Companies need to recognize that
simplicity can enable an effective start on an ESG reporting journey.

5.4 ESG Findings from Reporting AMFIU Members

The PMT was upgraded to include ESG indicators and the section below presents
the findings from the data received and additional research conducted with open
ended questions to gather more information.

Much as this is still a grey area, some organisations are making steps towards
institutionalization of environmental issues as shown by the findings below:

Existence of an ESG policy

According to the findings, majority of the institutions (69%) revealed that they did
not have an ESG policy and only (31%) had a policy in place as shown in the figure
below.

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A further problem among those that did not have the policy showed that they were
all interested in having such a policy but they did not have the required technical
capacity to develop the policy.

Budget for ESG Activities

On whether the financial institutions set aside a budget for ESG related activities,
the majority (68%) responded that they did not have such a budget item as shown
in the figure below. For those that had an ESG budget (38%), the biggest part of it
was going to mainly governance costs and social costs like financial education for
customers.

ESG Reporting/Performance Monitoring

The findings on reporting/tracking progress on ESG show that majority of the

institutions (73%) do not produce ESG reports and even the (27%) who responded
in affirmative mainly track social indicators and not environmental indicators as
shown in the figure below:

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 THE STATE OF MICROFINANCE IN UGANDA 2023

Existence of an ESG Focal Staff

To ensure that ESG is given the due attention it should be given in an organisation,
there’s need for board and management to appoint a focal person/staff that takes
it on as a priority, otherwise, it takes a secondary level. Based on the reports
obtained, majority of the institutions (80%) had an ESG focal staff as shown below.

5.4.1 Environment
For quite sometime, environmental and climate change issues have not been
a priority in the microfinance industry but recently, there’s been a growing
perception that incorporating an environmental lens to microfinance is essential
and critical for the future of the sector. In fact, the performance of microfinance
institutions has been expanded from just looking at a double bottom line to a triple
bottom-line that includes; People, Profit and Planet.

Global climate change is likely to affect both directly and indirectly MFIs/SACCOs
and their customers because the ecosystem and natural resources that most MF/
SACCO customers depend on for their livelihoods will be hit hard by the altered
climatic conditions and this will compromise their ability to pay back their loans.

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Therefore, to manage the risks that arise out of environmental factors, affecting
both the financial institutions and their customers, there’s need to monitor
and report on them. Below are findings on the environmental factors from the
institutions that reported using the upgraded PMT and the follow-qualitative
study.

Training on Environment/Green Financing/Climate change

Training of board, management, staff and customers of any financial institution is

vital in managing risks that arise out the challenge as the capacity to cope with or
mitigate effects of the challenge is built. Based on the reports received, only (23%)
of the institutions reported to have received any form of training and the majority
had received this training from aBi Finance.

Who was Trained

Of the (23%) above who reported to have received some form of training, the
majority trained were board members, followed by ESG focal persons and then
staff as shown in the figure below. None of the institutions had trained their
customers.

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 THE STATE OF MICROFINANCE IN UGANDA 2023

Green Performance Indicators as at September 2023

Impact reporting is now the globally accepted type of reporting. Therefore,
environmental considerations in the financial services sector cannot be just a
buzz word but are now a fundamental part of how business is done. Therefore,
quantitative indicators must be a vital part of the environmental report. The table
below shows the status of the green indicators from the reporting institutions:

No Item Indicator
1 Percentage of green loans 4.96%
2 Value of outstanding green loans (UGX) 14,143,512,830
3 Average loan size for green loans (UGX) 3,014,405
4 Average PAR (30 days) for green loans 1.47%
5 Average No. of loans rejected due to high environmental risk 5.5
6 Percentage of borrowers with an active micro-insurance policy 1%
for environmental disasters
7 Average number of green loan products per FI 3

Responding to Environmental Risk

Responding to environmental risk can be through mitigation, adaptation or

biodiversity conservation. Below are the findings from the reports on how the
customers of MFIs/SACCOs are responding to environmental risk;

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In terms of adaptation, the main measures have been; adapting to improved

post-harvest handling practices and materials, water installations for crops and
livestock, adopting smart agriculture practices like greenhouse farming and
warehouse and storage facilities as shown above; while in terms of mitigation,
the main practices include; collection and transportation of agriculture waste,
recycling, manufacturing and repurposing for agriculture use and soil and biomass
protection practices as shown in the figure below.

Biodiversity conservation is relatively a new phenomenon in the microfinance

sector, with limited financial products on the market to support it. Nevertheless,
the biodiversity practices by customers of MFIs/SACCOs are presented in the
figure below which shows the major practices as afforestation and forestry
rehabilitation/restoration.

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5.4.2 Social
The social pillar mainly delves into how a company interacts with its employees,
customers, communities, and stakeholders. In the microfinance sector, this is
mainly implemented through Social Performance Management (SPM) which is
an institutionalized process of translating a microfinance institution’s mission
into practice. It involves setting clear social goals, monitoring progress towards
these, and using this information to improve organisational performance. More
concretely SPM enables an institution to incorporate social performance in its
structure, policies and organizational processes.

Traditional evaluation has focused on end results and impact. However, impact
is just one element of social performance. Social performance looks at the entire
process by which impact is created. It therefore includes analysis of the declared
objectives of institutions, the effectiveness of their systems and services in
meeting these objectives, related outputs (for example, reaching larger numbers
of very poor households) and success in effecting positive changes in the lives of
customers. SPM requires a system that is built on an institution’s social mission
and is based on clear objectives. It needs to be implemented with defined methods
for collecting and analyzing data and for communicating and using the results. An
SPM systems helps to inform the staff of the organization how the customers are
interacting with the organization and identifies how to improve that relationship.

Strategy to achieve social goals

The entry point for the implementation of SPM is clearly defined social mission,
goals and objectives. Based on the reports collected from the members, majority
of the members (92%) said they had a strategy to achieve social goals as shown
below;

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 THE STATE OF MICROFINANCE IN UGANDA 2023

SPM training

In order to ensure implementation of the social performance strategy, there’s need

for capacity building of both board and management. Feedback from the reports
shows that only (40%) of the board members have received training in SPM and
the other (60%) have not received any training in this area as shown below;

Consumer Protection

Consumer protection is the basic indicator for social performance as it enhances

responsible finance and ensures that the customers are not harmed. On which
consumer protection principles, the institutions find challenging to implement,
the majority said it was responsible pricing because of challenges in technical
know how to calculate precise interest rates and fees and prevention of over-
indebtedness with the major reason being absence of an effective credit reference
system and appropriate appraisal processes.

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Performance Indicators for Vulnerable Groups as at September 2023

Outreach to vulnerable groups is a key goal for majority of the microfinance

institutions. Outreach and portfolio indicators for women and people living with
disabilities were reported on by the members as shown below:

No Item Indicator
1 No. of Persons with disabilities reached 11,096
2 Outstanding portfolio to people living with dis- 1,692,218,805
abilities (UGX)
3 No. of women reached 576,181
4 Outstanding portfolio to women (UGX) 1,230,845,912,161

Social Products

Feedback from the majority of the institutions indicates that apart from providing
financial products, they also offer non-financial products like training in financial
literacy, business skills, customer care, agriculture extension services and digital
literacy training. In terms of the social products offered as credit, these included
incremental housing loans, agriculture loans, WASH loans and renewable energy
loans. Data was only obtained for the WASH, agriculture and renewable energy
loans as shown below;

No Item Indicator
1 No. of customers receiving WASH loans 4256
2 Outstanding portfolio – WASH (UGX) 10,188,293,969
3 No. of customers receiving agriculture loans 108,120
4 Outstanding portfolio – agriculture (UGX) 45,538,101,696
5 No. of customers receiving renewable energy 7,560
loans
7 Outstanding portfolio – renewable energy (UGX) 11,865,656,583

Rural Outreach

Outreach to the most challenging areas to reach is a common social goal for most
microfinance institutions as they seek to remove access barriers due to location.
As shown below, majority of the institutions (67%) majorly operate in the rural
areas. This is mainly attributed to the SACCOs whose major concentration is
in rural areas and the branches of MDIs and non-deposit taking microfinance
institutions located in rural areas.

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5.4.3 Governance
Governance as a term has progressed from obscurity to widespread usage. The
need for governance exists anytime a group of people called stakeholders come
together to accomplish an end result. A board of directors is established to provide
oversight and give direction to the managers of an institution. Fundamental to
effective governance is the ability of individual directors to work together to
accomplish a balance between strategic and operational responsibilities.

In recent times, it encompasses elements such as board composition, executive

compensation, transparency, and overall management quality. Effective
governance ensures that a company operates ethically, mitigates conflicts of
interest, and maintains accountability to its stakeholders.

An effective Board is a requirement for an professional organization and based on

the data obtained from the reporting institutions, all of them (100%) had a Board
of Directors in place, board manuals to guide the board operations and relevant
board committees to ensure smooth functioning of the boards. The only difference
was in the number of Board members, with majority have nine (9) board members
(mainly SACCOs), followed by seven (7) board members as shown below;

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Gender Composition of the Boards

With inclusivity and diversity being a vital ingredient in board composition in

recent times, the reporting institutions were still below the average acceptable
rate of at least 30% women according to the constitution of Uganda as shown
below.

Existence of ESG Board Committee

On whether the organisations had a separate board committee to handle ESG

matters, majority of the institutions did not have such a committee in place as
shown below. This implies that ESG activities may not be monitored at board level
which can lead to management ignoring them.

However, on whether the board was assessing management performance with

regards to environmental and social performance initiatives, the feedback
obtained shows that these were part of the performance assessments by the
board as shown below.

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In essence, ESG encompasses a more holistic perspective on evaluating

organisational practices, highlighting the importance of responsible and ethical
operations in today’s interconnected world. As ESG considerations continue
to shape the landscape of responsible organisational practices, institutions
that prioritize these pillars are better positioned to thrive in an evolving global
economy.

5.4.4 Challenges of Implementing ESG

i. ESG reporting is about telling the impact organisations are making. How-
ever, reporting challenges begin with lack of appropriate tools to collect
data suited to the level of sophistication of the organisation. This makes
tracking information on issues like carbon footprints, customer livelihood
indicators, complex, expensive and time consuming.
ii. Lack of awareness: Most financial institutions and customers are still not
aware of the impact environmental changes have on their operations.
Therefore, investing in it is not a priority.
iii. Global standards on ESG that have created unrealistic targets, leading to
green washing with institutions trying to cope with set standards.
iv. Lack of resources (human and financial) to support ESG reporting. The
quantification of metrics especially on environment is still complicated
and it is therefore difficult to quantify where an organisation has reached
in compliance with ESG.
v. Green product development, appraisal of projects for environmental risk
and capacity building of board, management and staff are still a glaring gap
that the sector needs to cover if we are to reach milestones in ESG

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APPENDIX: 1 LIST OF REPORTING INSTITUTIONS

Adjumani town council Kashongi SACCO

Advance Smart Microfinance Kati youth ventures
ASA Microfinance Kiboga Farmers SACCO
Bagezza SACCO Kigarama farmers SACCO
BRAC Uganda Kigarama peoples SACCO
Bugadde SACCO Kihanga mparo SACCO
Bunyaruguru SACCO Kijura SACCO
Burere SACCO Kishenyi SACCO
Busiu SACCO Kitgum SACCO
Butuuro SACCO Koboko United SACCO
Celebrate SACCO KobokoTrinity SACCO
Centenary Bank Kolping Microfinance
Community Development Microfi- Kyamuhunga SACCO
nance Letshego microfinance
Community fund Lokitela Ebu SACCO
Destiny microfinance Loro oyam SACCO
Development microfinance Lwengo microfinance
Ebo SACCO Lyamujungu SACCO
Eclof Mamidekot microfinance
EFC Maranatha financial services
Eleglance Microfinance Mateete SACCO
Encot Microfinance MCDT SACCO
Glory Sacco Mitooma SACCO
Hakashenyi SACCO Moyo SACCO
Heritage microfinance Mt Otce Metu SACCO
Hima Community SACCO Muhame financial services
Hofokam Mushanga SACCO
Igara Buhweju Tea Farmers SACCO Mwizi SACCO
Iryaruvumba SACCO Nazigo SACCO
ISSIA SACCO Ltd Ngora SACCO
Jennis Microfinance Nile microfinance
Justa Microfinance Nyakayojo SACCO
Karibu microfinance Nyaravur SACCO
Kasaana SACCO Nzuri Trust

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Offaka SACCO
Offaka SACCO
Oleba SACCO
Oleba SACCO
Omipa SACCO
Opportunity Bank
Palma Microfinance
Premier Credit
Pride microfinance Ltd (MDI)
Real People
Rubabo Peoples SACCO
RUFI microfinance
Ruhiira millenium SACCO
Rukiga SACCO
RUSCA
Rushere SACCO
Rwanyamahembe SACCO
Sao zirobwe SACCO
Shuuku SACCO
Talanta microfinance
Tujijenge
Ugafode Microfinance
Uganda Microcredit Foundation
Umoja Microfinance
UNIFI LOANS SMC Ltd
Usalaama SACCO
VisionFund Uganda Ltd
Wakiso Self Help SACCO
Yudwesco

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66
AMFIU House, Plot 679, Wamala Road, Najjanankumbi (Off Entebbe Rd)
P.O. Box 26056 Kampala - Uganda
Tel: +256 (0)414 259 176, 0414 677 176
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