ugandans, and are thus essential in the struggle to eradicate poverty. the respondents of the world bank ’ s doing business survey reported in the 2013 african competitiveness report cited access to finance as the second most problematic factor for doing business in uganda ( after corruption ). the main reason why interest rate spreads in uganda are so wide is the high fixed and operating costs of the banks. interest costs comprise less than a third of the total expenses of commercial banks in uganda ; the rest of the costs comprise salaries, utilities, the maintenance of buildings and provisions for bad debts. reducing bank operating costs is essential if interest rate spreads are to narrow and lending rates for borrowers are to be made more affordable. however, reducing bank operating costs may not be compatible with expanding access to banking services to the poor, if the transactions costs and the risks involved in providing banking services to the poor are higher than those involved in serving existing bank customers. that does not make it undesirable to expand financial services to the vast majority of the population currently unbanked, but it does mean that it must be done in a cost effective manner which does not force up the average cost to asset ratios of banks or increase the risks in their loan portfolios. how might it be possible to promote financial inclusion in a manner which does not conflict with other strategic goals of financial sector policy? branchless banking innovations like mobile money and agent banking offers a solution to some aspects of the problem of financial exclusion, although not all. over eleven million people, comprising a third of uganda ’ s population, are registered as mobile money customers. mobile banking in uganda currently only offers payment and money transfer services, but it has the potential to provide a platform for other financial services ; for example linking customers to savings accounts in banks, as is starting to happen in kenya through the agent banking model. however mobile banking per se will not alleviate the main constraints facing the poor in accessing credit from formal financial institutions. microfinance institutions, which utilise innovative modalities for serving low income households, such as group lending, and provide financial products which are tailored to the needs of this segment of the population, offer another channel for expanding financial inclusion. when microfinance first emerged in uganda, in the 1990s, it was undertaken by bis central bankers ’ speeches not for profit organisations using concessional finance from abroad and did not involve taking deposits from customers. in 2003, uganda enacted legislation to allow microfinance institutions to take deposits and

- central bankers'speeches as i end my remarks, i must reiterate that it is imperative to recognize the critical role the financial sector plays in driving sustainable economic development. his excellency, the president, emphasized that " the financial sector is key to sustainable economic development through mobilizing and using domestic savings and investments. unfortunately, it is not reaching its full potential and is far from bringing prosperity to all ugandans. " we must address this challenge head - on. by embracing the esg framework, the financial sector can unlock its true potential and drive national socio - economic transformation. this framework should not just be a guideline, but a call to action - a call to bridge the gap between where we are and where we can be. currently, the ratio of domestic credit to the private sector in uganda stands at a mere 14 % of gdp. in contrast, kenya boasts 32 %, and the sub - saharan africa average is around 30 %. this disparity highlights a significant opportunity for us to improve. i urge the uba to take the lead in addressing this gap. by increasing financial deepening, we can ensure that our sector not only matches but exceeds our regional peers. let us heed the president's vision of leveraging finance to spur economic prosperity for all ugandans. together, through the diligent application of the esg framework, we can transform our financial sector into a powerful engine for growth and inclusivity. let us commit to this journey, unlocking the full potential of our domestic savings and investments, and driving uganda towards a prosperous and sustainable future. in the words of luke 12 : 48b, " from everyone who has been given much, much will be demanded ; and from the one who has been entrusted with much, much more will be asked. " as stewards of the financial sector, we are entrusted with a significant responsibility to steer the sustainability agenda. let us rise to this challenge with conviction, determination, and a shared vision for a more resilient and sustainable future. it is now my honour to officially launch the esg framework for the banking industry today, 4 june 2024. together, we can forge a path towards a prosperous, equitable, and sustainable future for uganda and beyond. thank you for listening to me. god bless! 3 / 3 bis - central bankers'speeches