Uganda has maintained its fourth-place ranking in the Absa Africa Financial Markets Index (AFMI), a position it has held for the past year. However, the country’s score has shown significant improvement since 2017, reflecting its progress in developing its financial markets. According to the index, Uganda’s score has increased to 63, driven by its strong macroeconomic performance and transparency. The country has made significant strides in improving its financial markets, rising from ninth place in 2017.
The report also indicates that market depth in Uganda’s financial sector remains a challenge, as there was no turnover in sovereign or corporate bonds between June 2023 and June 2024. This lack of trading activity highlights a key issue: limited liquidity in the bond market, which is essential for fostering a vibrant, dynamic investment environment.
However, there’s optimism for improvement. One of the promising solutions to enhance market depth is the proposed linking of the Bank of Uganda’s central securities depositories (CSDs) with the securities exchange depositories. This connection could significantly boost liquidity by streamlining the settlement process and making it easier for investors to buy and sell bonds. A more liquid bond market would not only increase investor participation but also create more opportunities for capital raising and financial market growth.
By improving market infrastructure and increasing liquidity, Uganda could unlock new potential for both local and international investors, helping to build a more robust financial ecosystem. “Uganda’s rise from 9th place in 2017 to 4th today is a testament to our progress,” said David Wandera, Interim Managing Director of Absa Uganda. “While we celebrate these achievements, we recognize there is still work to be done. Developing our financial markets further requires ongoing collaboration between government, regulators, and the private sector.”
Key takeaways on Green Finance and ESG from the Absa Africa Financial Markets Index. Uganda is strongly emphasizing sustainable finance, with several key initiatives set to transform its financial landscape.
Green Bond Framework: Uganda is set to roll out a green bond framework by FY2024/25, allowing the country to raise capital for projects focused on environmental sustainability. This will provide an important avenue for financing renewable energy, climate resilience, and other green initiatives.
ESG Banking Framework: The country is also implementing an ESG banking framework, which will guide financial institutions on how to incorporate ESG factors into investment decisions, risk management, and reporting.
Global Partnerships: Uganda is collaborating with global partners like the IMF to support the introduction of green bonds, tapping into international expertise and funding.
However, Uganda still faces challenges, including low market liquidity and pension fund development. The country scored poorly in terms of market transparency, tax, and regulatory environment, ranking 11th with a score of 76.
More in Uganda – https://www.youtube.com/watch?v=k1jkjtfQADQ
