The Ugandan financial sector has been faulted as having one of the lowest savings-to-GDP ratio in sub-Saharan Africa, with majority of the population being unbanked and despite the country’s financial sector’s continued growth, investing in capital markets is what the public is not familiar with.
Despite the fact that the government has put in place good polices towards poverty eradication, the poor saving culture still remains the main roadblock in the fight against poverty, mainly because Ugandans consume more than the income they get.
In order to promote savings and investment, Capital Markets Authority (CMA), is rolling out a platform promotion of unit trusts also known as mutual funds; although this is not a new concept, its intake in Uganda has been slow.
This was revealed by Keith Kalyegira, executive director at CMA, during the closing of a three-day CMA exhibition held in Kampala last week, who explained that unit trusts are a way where several investment clubs and Saccos can invest through the capital markets.
A unit trust is one that enables several investors to engage one manager who makes all investment decisions investors don’t have to worry of where to invest since managers choose for them.
According to CMA, the development of unit trusts has not been known by many and the few players in the country tend to shy away from investing too much money because of the fear of failing to make returns in the long run.
Kalyegira added; “Because as a country we are interested in seeing investments grow, CMA is going to provide a platform for trust managers to talk about benefits, how to invest, get in, out, [and]where the cash is invested; we hope this will attract more people.”
This is going to be done in the next three years; CMA said they have a deliberate agenda towards that direction to boost market-based financing.
This development comes at a time when the public is getting curious about the process of investing in capital markets; people have tried unconventional methods of saving which seen to become unpredictable, according to CMA.
“People have tried livestock, rental units, forestry, and land but there is an interest in financial instruments as government continues to offer treasury bills, bonds which are more reliable and safe and payments are always in time,” he said.
Kalyegira admitted that the public still lack information on the operations of capital markets but said CMA has set aside funds to do more public sensitization as well as holding capital markets exhibition yearly in order to cover the information gap.
Uganda has only four investment trusts which include ICEA, UAP, Xeno and Stanlib combined; they are managing Shs 21bn although CMA says the figure is so small and can rise to Shs 200bn in three year.
“We are currently reviewing our laws to make it easier and for the schemes to be registered. The minimum requirement of setting up a scheme is Shs 200 million,” he said.
Uganda has over 2,000 investment clubs with an average of 30 people