emmanuel tumusiime - mutebile : providing affordable banking services in uganda speech by mr emmanuel tumusiime - mutebile, governor of the bank of uganda, at the official opening of orient bank limited, acacia mall branch, kampala, 3 april 2014. * * * the shareholders of orient bank limited ; members of the board of directors ; senior management and staff ; invited guests in your respective capacities ; ladies and gentlemen. it is an honour and pleasure for me to join you today at the official opening of orient bank ’ s acacia mall branch. let me begin by congratulating the shareholders, directors and senior management of orient bank for the commendable job they have done in implementing their branch expansion programme, thereby bringing banking services nearer to the people. during the past twenty years of operation in uganda, orient bank has expanded its service delivery channels and outlets. the branch being opened today here at the acacia mall brings the total number to twenty. ladies and gentlemen, this occasion not only marks success for orient bank in increasing its presence in the banking industry, but also lends support to the bank of uganda ’ s financial inclusion agenda, which aims to extend access to affordable financial services more widely among the population. extending access to financial services will only be possible on a large scale if banks can overcome the cost barriers which are a major obstacle to the wider provision of financial services. therefore, i would like take this opportunity to reiterate my view that banks in uganda must prioritise improving efficiency. operating costs as a share of total assets are too high. it will only be possible to provide more affordable financial services to ugandans when operating costs are brought down. one of the ways in which costs can be lowered is through the introduction of new technologies for delivering financial services, such as information technology. orient bank has been at the forefront of introducing innovative technologies and products to the ugandan banking market. it was the pioneer of the point of sale technology in uganda with its benefits of promoting a cashless economy. in addition, the bank remains the sole issuer of american express cards in uganda. i also understand that the bank will soon launch the “ chip and pin ” visa cards, an innovation that will enhance the security features of the bank ’ s existing visa card product. it is however, important to note that increased innovation comes with increased risks. i therefore urge orient bank to design robust risk management processes and internal controls to mitigate the risks inherent in technological advancement. turning

such as treasury bills and bonds through regular auctions. issuing local currency instruments on the domestic market is the optimal vehicle for raising private sector finance for the budget. with such instruments auctioned in competitive market and actively traded in the secondary market, their pricing is relatively cheaper than other forms of debt such as commercial bank loans. the main investors in local currency denominated government bonds are pension funds, insurance companies, commercial banks and, to a lesser extent, offshore portfolio investors. all of these investors are acutely aware of the need to balance risk with competitive rates of return. the main risk facing investors in local currency bonds is that the government ’ s fiscal position becomes unsustainable, such that it either defaults on its debt or has to resort to inflationary finance to service its debt, which would then erode the real value of the debt. hence to mitigate these risks, government must be able to demonstrate, in a credible manner, that it will not allow its fiscal position to become unsustainable. to generate confidence in the sustainability of public finances, governments should formulate their budgets within a medium term fiscal framework which clearly shows the path of the fiscal deficit over at least the next five years and the associated path of public debt. a fiscal framework in which fiscal deficits are so large as to require continuously rising public debt to gdp ratios will be perceived as being unsustainable and is, therefore, not conducive bis central bankers ’ speeches to mobilising long term finance from the private sector except at very high interest rates. therefore, the prerequisite for mobilising long term finance for infrastructure projects is a prudent fiscal framework, in which the future path of public debt remains comfortably within sustainable levels. the most important message which i want you to take from my remarks this morning is that any consideration of mobilising finance for infrastructure by governments must take place within a framework of fiscal sustainability. the second category of infrastructure project is that of commercial projects. these are projects for which it is feasible, and usually optimal, to sell the services produced by the infrastructure directly to the users, with the tariffs charged covering the full cost of producing the service, including its debt servicing. they include electric power generation and port facilities. such projects are usually owned by separate legal entities from government ; e. g. limited liability corporations. increasingly in east africa, as elsewhere in the world, the corporations which own and manage these projects are owned by the private