and profits. 3 consequently, formal financial institutions that rely on audited financial statements and wellarticulated project and financial proposals to disburse loans assume that most smes are mugume, a. ( 2008 ). profitability, concentration, and efficiency in uganda ’ s banking industry. ( d. a. kihangire, c. a. abuka, & j. o. apaa, eds. ) the bank of uganda staff paper journal, 2 ( 1 ), 5 – 35. world bank database 2013. kasekende, l. and opondo, h. ( 2013 ). financing small and medium scale enterprises ( smes ) : uganda ’ s experience. bou working paper wp / 03 / 01. bis central bankers ’ speeches high risk borrowers whose credit worthiness is not easy to establish due to information asymmetry. in addition, formal financial institutions assume that extension of credit to these smes would require high monitoring and enforcement costs. both these supply and demand related factors remain major handicaps to the development of medium to long term financing. as a result, the government of uganda ( gou ) in collaboration with its development partners alongside bank of uganda has had various attempts in the past to remedy the structural bottlenecks in credit allocation. these attempts took the form of low interest rate credit schemes 4 such as ( 1 ) apex private sector loan scheme ( apex ) ; ( 2 ) export refinance fund ( erf ) ; ( 3 ) distressed flower project fund ( dfpf ) ; ( 4 ) export promotion fund ( epf ) ; and ( 5 ) development finance fund ( dff ). other schemes have included ( a ) investment term credit refinance fund ( itcrf ) ; ( b ) cotton sub - sector development project ( csdp ) ; ( c ) rehabilitation of public enterprises ( rpe ) project ; and ( d ) export credit guarantee scheme amongst others. more recently, the agricultural credit facility ( acf ) was introduced in 2009 to deal with the second round effects of the global food price hike of 2007 and promote value addition in agro - processing. the performance of these schemes has been varied. the timing of introducing the schemes, mechanism of delivery and quality of business cases from smes for these loans partly explains the variance in performance. ultimately, the sustainability of these credit schemes has been and will be dependent upon low defaults of the loan portfolio and low overall administration costs.

begin by considering how to promote solvency and liquidity, taking into account the unique structures and activities of each type of nonbank. liquidity challenges vary across nonbank firms and activities. in some, the issue is whether a firm can fund itself in a distressed situation. for example, a broker - dealer that relies heavily on short - term wholesale funding may find its funding evaporating at the first sign of trouble – a situation that could force the sale of assets at fire sale prices. one way to mitigate such problems is by having direct restrictions on the structure of liabilities, such as on their duration or on the use of wholesale funding. analogously with banks, one could also imagine requiring some nonbanks to maintain buffers of highly liquid assets that are sized according to the risk that their liabilities will run off quickly in a stress situation. in other nonbanks, withdrawable liabilities are part of the structure of the entity or activity, and what varies is the degree of mismatch between the liquidity of assets and liabilities. for example, some open - ended mutual funds offer daily withdrawal privileges but invest in assets that take longer to sell and settle, giving investors an incentive to withdraw quickly when distress arises. the fire sales of assets that may result can depress asset prices and increase volatility, with knock - on effects on other institutions and markets. concerns have grown about this liquidity mismatch as the aggregate value of less liquid assets in such funds has grown. in part because of this concern, in a december federal register notice last year, the financial stability oversight council ( fsoc ) requested public comment on potential systemic risks posed by asset manager activities and products. to promote solvency, one could impose ratio - type capital requirements, such as leverage ratio requirements or risk - based requirements. an alternative is to require that firms perform regular stress tests to demonstrate that they can remain solvent and continue to lend even under stress. in the fed ’ s case, it has chosen to impose all of these requirements on banks, but these requirements cannot simply be applied, as is, to nonbanks. see gorton and metrick, “ securitized banking, ” in note 4, op. cit. ; jeremy stein ( 2012 ), “ monetary policy as financial stability regulation, ” quarterly journal of economics, vol. 127, pp. 57 – 95 ; robin greenwood, samuel hanson, and jeremy stein ( 2014 ), “ a