louis kasekende : uganda ’ s financial sector at 50 – achievements, challenges and expectations for the future speech by dr louis kasekende, deputy governor of the bank of uganda, at the uganda institute of banking and financial services annual dinner, kampala, 1 march 2013. * * * chief executive officer, uganda institute of banking & financial services chief executives of commercial banks invited guests ladies & gentlemen i would like to begin by thanking the uganda institute of banking and financial services for graciously inviting me to speak at this occasion, where we will celebrate 50 years of achievements by the banking and financial services industry in uganda and look ahead to the challenges that the industry will confront in the future. i also want to commend the institute for the excellent work it is doing, especially through professional training of staff ; training which is critical to helping the industry meet the exacting demands of a modern economy in which technology and markets are evolving at a rapid pace. in these remarks i would like to highlight the most notable achievements of the banking industry since the start of the millennium and then go on to identify what i believe are some of the most pertinent challenges that the industry must face in the years ahead. the banking industry in uganda can take pride in four major achievements since the start of this millennium ; achievements which have brought important benefits for the wider economy and the ugandan public. the first achievement i want to highlight is the dramatic increase in the intermediation of funds ; the extent to which banks convert the deposits that they mobilise into loans to the corporate and household sectors. in the 1990s, uganda was a very low intermediation banking system. at the end of the year 2000, commercial bank credit to the private sector was only six percent of gdp and banks only lent out 54 percent of their deposit base to the private sector. by the end of 2012, 80 percent of the banks ’ deposit base had been lent out to the private sector and private sector credit as a share of gdp had risen to 15 percent. in the twelve years since the end of 2000, bank lending to the private sector has risen five fold in real terms. the second impressive feature of the performance of the banking industry in recent years is the expansion of the branch network. in the year 2000, there were 129 bank branches in uganda. at the end of last year this had risen to 495, a four fold increase. in the last five years, uganda has seen an average of 60 new branches

and efficiently. bank negara malaysia was appointed as the single regulatory and supervisory body for dfis under the act. in carrying out the regulatory and supervisory function, the central bank's focus is primarily to promote the development of sound and robust dfis capable of performing their mandated roles effectively. seven dfis are currently placed under the purview of the act. recognising the unique characteristics of each dfi, regulations and policies have largely been tailored - made to suit the different roles and functions of each dfi with the view of facilitating and strengthening their operations. in general, the dfis are required to ensure that their operations and activities are in line with their mandated roles, underpinned by good corporate governance and best practices. they are required t o operate with transparency, especially with regard to information disclosure on their corporate performance, in order to enhance credibility and to harness greater confidence from the public that they serve as well as from the government. strategies formulated have also been focussed on enhancing the clarity in the roles and functions of the dfis, with a view of minimising the overlapping of functions and increasing dfis'effectiveness in serving the targeted sectors. this has led to a number of initiatives to realign and enhance the strategic focus through the restructuring of selected dfis. one is the merger of the exim bank and mecib to enhance their synergy in export promotion. the 4 / 5 other important initiative is the rationalisation of bank pembangunan and bank industri, which will result in the establishment of an sme bank. the sme bank, a specialised agency dedicated to the promotion of sme development, will commence operations in october 2005 and is envisaged to better serve the needs of smes through the provision of a comprehensive range of financial and non - financial services. in particular, the sme bank will focus on nurturing the smes and promoting entrepreneural development, through the provision of financial and business advisory services, including financial management, business diagnosis and marketing support. recognising the importance of human resource development as part of the capacity and capability enhancement strategy, several initiatives have also been undertaken to enhance the skills of dfis, particulary in the provision of advisory services and micro financing. in collaboration with the japan international cooperation agency, bank negara malaysia is currently embarking on a project to enhance the capabilities of dfis in providing advisory services to the smes.