Bank of Uganda – Prime Time Communications

Out to Lunch

#OutToLunch Amalgamate saccos to provide women with patient capital

By Denis Jjuuko On 8 March, Uganda marked yet another women’s day. Several activities were carried out. High profile people gave lofty speeches once again. Promises were made. As is always the case in Uganda, group photos were taken. Meals I believe were served. And of course, some dancing. Reminders must have been made of what has been achieved and how grateful the women should be. But the majority of Ugandan women probably didn’t even notice the day. They were too busy eking a living or trying to survive to even notice. Women emancipation is still a pipe dream for many. There have been a lot of emphasis for women empowerment and some milestones have been achieved. Still, more needs to be done. One key area that can transform women’s fortunes is formal education. Averagely, the more educated one is, the higher the chances of better incomes whether as a salaried person or through entrepreneurship. There is usually some talk on education or the lack of it where many people point to one successful entrepreneur without formal education and present it as standard for wealth creation. Those outliers will always exist. Even among those with high formal education qualifications, outliers exist. But the majority of people without formal education don’t earn better than those with formal education. Many studies have been done on this by institutions like the World Bank. Households, communities and governments must ensure that girls stay in school for as long as possible. The minimum education should be completion of secondary education. Educated girls will value education and therefore will ensure their children go to school too. They will most likely not give birth to 10 kids they can’t look after. They will not easily think that the only pathway to success is marriage. And they won’t look at bride price as the route to their own success as parents. That way they will avoid becoming grandmothers at age 35. Formal education should be complimented with regular refresher courses on emerging issues. Today, everyone is talking about artificial intelligence and how it is disrupting everything. How can ordinary women get basics on artificial intelligence that is relevant to the work they do? Is there artificial intelligence that is relevant to a market vendor? Let them know about it. Digital training is necessary from time to time. Look at WhatsApp and its potential to connect millions and provide access to markets at almost no cost. Women leaders at the lowest level can be empowered to pass on skills to their people on what is working and how they can use emerging technologies for their own good. But so are a plethora of other applications that can enable people connect, promote their enterprises, seek for work or workers. There has always been a lot of talk on access to capital for women in entrepreneurship or to pay for needs such as school fees for their children. Some programs exist in that regard but sometimes the conditions are never favourable. High interest rates and short loan periods making it hard for women to borrow money to grow their enterprises or pay for their needs. Many women don’t own land which is the most common asset they can offer as collateral to banks and other lenders. Many women have had to rely on their own collective savings or saccos which lend at rates even higher than commercial banks though without the burden of collateral and paperwork. And lenders have observed over many years that female borrowers usually pay back more than male ones. A case, therefore, exists for a more long-term fund for women to access patient capital at low interest rates with less paperwork. Alternatively, how can many of the thousands of women saccos be amalgamated into a fund that has the organizational and operational capacity to provide fellow women patient capital? The Bank of Uganda and the government can guarantee the members protection of their money by providing oversight and insurance, similar to what they do with commercial banks or depositors’ money. The money raised by these saccos could be invested and the returns used to create an endowment fund that lends patient capital to millions of women. Women empowerment would move from being part of beautiful speeches and footnotes of studies into something ‘tangible’ that can truly transform the lives of the majority of women. The writer is a communication and visibility consultant. djjuuko@gmail.com

March 27, 2025

Out to Lunch

#OutToLunch Declined treasury bond bids could spur private sector growth

#OutToLunch Declined treasury bond bids could spur private sector growth By Denis Jjuuko As you already know, Uganda is one of the most entrepreneurial countries in the world. Many people including those in formal employment have some bit of business they do on the side. We have come to know it as the side hustle. Many of these businesses aren’t that profitable as they are subsidized by their owners using income or perks from their formal jobs. A farm in the countryside that may look profitable may cease being so once the owner starts factoring in the cost of driving there every weekend. Others are subsidized by spouses, sometimes unknowingly. If for example you fuel your spouse’s car which they use to go to run their boutique in the mall and meet all its maintenance cost, they may not realize that the business they think is profitable isn’t actually. Once the formal job goes or the spouse renegades on meeting some costs, many of these side hustles collapse. But they aren’t the only ones. Even those started by full time hustlers collapse within the first five years. There are many reasons why businesses collapse but one of them is the cost of capital or in most cases the sheer lack of it. If you are into motivational books from America and Europe, they will claim that capital isn’t the most important thing for an entrepreneur. They may have a point but they write from an economy where venture capital exists or where loan interest rates are in single digits, not ours of upwards of 20%. So, for a Ugandan entrepreneur, capital or the lack of it is a key reason for the success or failure. So, I was intrigued reading a press release from the Bank of Uganda that gave results of the central bank’s treasury bond auction held on 12 July. They (central bank) needed to borrow Shs150 billion for a three-year period and Shs300 billion for 20 years. Instead, it received bids worth Shs272 billion for the three-year bond and Shs838 billion for the 20-year bond. It accepted Shs171 billion for the three-year bond at 13.5% interest annually and Shs354 billion for the 20-year bond at 15%. More than Shs585 billion was not taken so investors may be out there looking for opportunities on the secondary market or for the next auction. As individuals and institutional investors trip themselves to lend to government, businesses are collapsing for lack of money. And the government is telling them, we don’t even need much of your money anyway. Take it elsewhere. But they won’t because treasury bonds and bills give investors a very low risk return for their money. So imagine if you invested Shs1 billion for 20 years and did nothing and at the end of the day earned a gross income of Shs150 million annually (paid twice a year), why would you do anything else? A commercial bank would rather invest its billion in a treasury bond where it is almost guaranteed of a 15% gross return while doing nothing than lending it to a businessperson at 24% without any guarantees that the money will be paid back. The businessperson may have secured a loan with a building or land as a collateral but still commercial banks are not in the real estate business. They largely frown at the hustle of selling people’s assets when they fail to pay back. To avoid the inconvenience of selling people’s assets when they have failed to pay and the cost of loan recovery, they prefer to lend to the government through treasury bonds and bills. Without any hustle, they get their gross 15% annually on their investment. Who wouldn’t want to do that? That pushes the cost of money in Uganda higher because the alternative through the central bank auctions is much better than running after an individual to pay back. And sometimes you even end up in costly legal battles as the borrower claims you didn’t have the legal mandate to lend to him and therefore wouldn’t pay. But this Shs1 billion may not be able to grow the economy as much as that invested in the private sector where many jobs could be created. As a country we need to find solution for affordable capital for the private sector. So instead of the central bank declining nearly Shs600 billion of bids, what about taking it at a lower interest rate and then lend it to businesses at a rate that can enable businesses to grow? That way they would collect more taxes from the growing businesses. Or how do we build the confidence of investors in treasury bonds to instead invest in private sector when their bonds are declined? The writer is a communication and visibility consultant. djjuuko@gmail.com

October 18, 2023

Out to Lunch

#OutToLunch How to avoid having money in dormant bank accounts

By Denis Jjuuko Almost a trillion shillings is lying idle in dormant bank accounts, the Bank of Uganda said at a presser recently. And if this money is not claimed in 10 years, it would be taken by the government. You can call it the Idle Money in Bank Accounts Tax. If they lend this money to themselves before they take it at just 10% per a year (net of taxes), they would have another trillion in 10 years. How do people get to have money in dormant bank accounts? Bank of Uganda and ministry of finance officials didn’t say. But maybe people die and the next of kin don’t how to process this money or some are too liquid that they leave money lying idle in dormant bank accounts for years. The problem though is that this money is bad for the economy. It makes government lazy, earning money they have not worked for, which means they may not care how it is spent. If you earn free money, you have a license to be wasteful. If a trillion shillings had been spent or invested, there would have been some improvements in the economy. A trillion shillings can create many small jobs and sustain many others. But how can we avoid a scenario where money remains idle in bank and now mobile money accounts to the extent that the government takes it away. One way is to ensure that at least your next of kin knows the banks and mobile money where you invest. If you die suddenly, they would at least claim it and use it. The other is to have a will where bank accounts are listed and money allocated to people who can utilize it upon your death. However, one way we can avoid having idle money is by investing it. Many studies tell us to save and it is important and may be that is one of the ways accounts become dormant. Money should be invested to make more money. I may be wrong but I believe that invested money doesn’t end up in dormant accounts. How can we invest money? Many times, we think that to invest you need a lot of money. It is sometimes small amounts that can lead to significant investments. Somebody I know wanted to buy land so she can join the real estate sector. She wanted at least an acre within 20km of the Kampala central business district. She didn’t have even a quarter of the value of what she wanted but she decided to go ahead and look for sellers that would accept her payment plan. After many months of searching, she found somebody who agreed to her payment plan. She made a deposit and started putting whatever little money she got into the mobile money account of the seller. Whenever the seller was hard up, he would call sometimes for as little as Shs100,000. If kids were going to school, the seller would call. If he lost somebody and wanted to go for burial, he would ask for money. She just kept a ledger of the transactions. Before not too long, she had paid off the guy and she received her land title. She got a surveyor to subdivide the land into eight plots, which she now sold off at a premium. Last I heard from her, she was now dealing in much bigger sizes. Accumulating capital is through investment and not necessarily through savings. And in a country where raising capital is a challenge due to the high cost of money, starting small is always the easiest way to do so. Finding somebody who can accept your payment terms for something so huge is one way to do it. Idle money if not left in dormant bank accounts, it could easily be spent on non-essentials. With an economy that contracted due to Covid-19, there are always more people asking for money than ever. People you hardly talk to will text you for money and if you have it, you may feel guilty for not helping them. If you have credit with your suppliers, you will think twice before helping every undeserving person who asks. The other key thing is not to be secretive about the projects that you are involved in with your family and close friends. A spouse won’t expect you to offer endless dinners in 5-star restaurants when they know that the guys setting up your factory are demanding payment for the steel beams and trusses they supplied last week. They will understand when you say you are broke. The writer is a communication and visibility consultant. djjuuko@gmail.com

October 11, 2021