Big Plan for Small Sums
This paper discusses Ugandas Financial System Development (FSD) Program.
Although the Ugandan microfinance sector is flourishing, it is not adequately regulated or supervised. Political interference, MFIs that exist only on paper, inadequate leadership and management and credit banks with a doubtful reputation are some of its problems. In a far-reaching joint program, the Bank of Uganda, the Swedish International Development Cooperation Agency and the GTZ (now GIZ), are advising the Ugandan Central Bank on developing the financial system. Financial system reforms in Uganda include:
- Passing the Micro Finance Deposit-Taking Institutions (MDI) Act;
- Creating solid foundations;
- Guaranteeing the independence of microbanks that meet certain conditions;
- Precise regulations on licensing for the deposit business and submission of regular reports to the Central Bank;
- Outlining the supervisory functions of the Central Bank;
- Encouraging competition by allowing commercial banks to get into microfinance;
- Microfinance Outreach Plan (MOP), which intends to expand microfinance services throughout Uganda.
Finally, GTZ plans to improve Ugandas microfinance sector by establishing additional training institutions, creating deposit insurance, implementing a strategy for agricultural finance and additional strengthening of bank supervision.
