sets out a number of activities to be pursued through july 2007 in ten key areas. these include efforts related to : free and fair elections, anti - corruption, anti - money laundering, procurement, the office of the auditorgeneral, civil service reform, decentralisation and the role of non - state actors ( notably the private sector and civil society ), the creation of a more conducive investment environment, implementation of the extractive industries transparency initiative and better public service delivery in health and education. the pact also commits the four budget support donors to further harmonisation around the government ’ s programme ”. enforcement of the governance agenda is consequently exercised by the donor community through inclusion of governance requirements in the programmes of assistance agreed with the country ; establishing them as conditionalities and trigger requirements for release of funds ; providing technical assistance to ensure the performance of these elements of the programme, including provision of personnel in some cases. we may note in passing that action on all these requirements is in progress and the related programmes are in varying stages of implementation. civil society is also becoming increasingly important in trying to put pressure on government to deliver on governance issues. in the sierra leone context, special mention may be made of the campaign for good governance, the civil societies organisation, the 50 / 50 group, the lawyers centre for legal assistance ( lawcla ) and other bodies. a recently established chapter of the institute of directors pays particular attention to the improvement of corporate governance. the press has continued to wage a governance campaign, especially with respect to anti - corruption matters. some general remarks the governance debate is a difficult one, not least because of the imprecision of the concept and its multi - dimensionality. this opens room for a range of interpretations and the inclusion of diverse elements, rendering the basis of discussion somewhat fragile. there is also a measure of ambivalence regarding its practical application and suspicion in some case of the motives underlying the significance attached to it by the donor community. its link with poverty reduction is not uncontested, and questions also arise as to whether it is not really the washington consensus and structural adjustment in new clothing. in the african context, there is admission of mis - governance in many areas of state management. in particular, corruption and impunity in public administration, conduct of elections, financial management and judicial processes, are bemoaned on a wide scale. serious observers agree that there is a need to correct the institutional arrangements that create an avenue for some

of four ( 4 ) commercial banks and others are in the process of joining. this development will go along way to enhance the payment system by facilitating customer payments for utilities and purchases using debit cards. licensing of the inter - bank switching system marks a significant step in bank of uganda ’ s efforts to widen the financial sector, which will result into the creation of a wider range of delivery channels to banks. as you are all aware continued efforts to improve efficiency and mitigate risks in the payment system resulted into the implementation of a number of initiatives including a real time gross settlement ( rtgs ) system known as uganda national inter - bank settlement ( unis ) in february 2005. as of now, about 80 % of large value and time critical payment transactions pass through the system leaving 20 % to pass through the traditional clearing system. likewise, to broaden the outlet and variety of institutions, which offer financial services, three new micro deposit taking institutions ( mdis ) were licensed in 2005 bringing the total number of licensed mdis to four. the significance of licensing mdis has far reaching impact on promoting the savings culture and thereby fostering the accumulation of funds for investment purposes. bank of uganda therefore encourages the council of the institute of bankers to initiate appropriate educational training programmes from which these new institutions can access information and expertise necessary for their future development. bank of uganda on its part will continue to promote the development of mdis through prudential regulation and supervision so that they conduct their businesses in a manner that ensures safety of depositors ’ funds. notwithstanding the above developments, the financial sector still continues to face new challenges in their operations including globalization, relatively high interest rates, frauds and forgeries and lately the energy crisis. with respect to globalization, this has resulted into a fast pace of technological advancements in products and systems deployed in the global markets. these technological advancements have dramatically diversified the risk profiles of financial institutions. to address this new development, bank of uganda has compelled all supervised financial institutions to institute credible risk management frameworks which can adequately identify, measure, monitor and control all risks inherent in financial institution business in a timely and ongoing manner. regarding the high interest rates charged on loans, although these have remained relatively stable in the last two years or so and while inflation has been maintained at single digits for over a decade, lending rates have continued to remain at high levels and at times as high as 26 % p. a in some banks. yet, the weighted interest rates on deposits continue to