The Integration of the Microfinance Sector into the Financial Sector in Developing Countries - The Role that Apex Mechanisms Play in Uganda

This paper examines microfinance apex mechanisms in Uganda that act on a meso-level, performing two main roles:

• Financial intermediation of donor funds;
• Market development.

The paper explores three questions:

• How does the microfinance sector develop within the overall financial sector?
• Do apex mechanisms contribute to a sustainable expansion of the microfinance sector and allow for efficient resource allocation?
• At which stage of the sector development do apex mechanisms contribute?

The paper:

• Provides theoretical background on:
  • Financial market development,
  • Apex mechanisms.
• Reports:
  • Evidence of the development of the sector;
  • The general activity of the apex mechanisms in Uganda.

The paper finds from the study that apex mechanisms play an important role in the areas of:

• Donor coordination;
• Market development;
• Linking the formal financial sector to the informal microfinance sector;
• Standardization of the microfinance sector;
• Information dissemination.

The paper concludes that apex mechanisms:

• Are a temporary phenomenon;
• Need to be flexible in design;
• Must be decentralized to for efficient resource allocation.