Selected Issues


Selected Issues

Financial Inclusion and Development 1

  • Traditional indices suggest that Uganda’s financial development is low relative to regional peers, with significant scope to enhance the sector’s contribution to growth.

  • Financial development also underperforms benchmarks based on fundamentals.

  • Measures to raise the credit-to-GDP ratio include addressing high interest rate spreads, strengthening the credit infrastructure, and developing additional products through the mobile money platform.

  • There is scope to enhance financial development more broadly through initiatives to liberalize the insurance sector and further develop capital markets.

A. Financial Access in Uganda

1. A well-developed financial sector is important for economic growth. International evidence supports the existence of strong linkages between financial development and growth and reduced inequality (Levine 1997; Beck et. al, 2007). Financial development can help lift a country’s growth potential by mobilizing savings, promoting a more efficient allocation of capital, facilitating economic diversification and risk management, and can reduce income inequality by easing credit constraints on the poor. Enhanced financial development initially promotes financial stability and greater economic resilience, by strengthening financial buffers and broadening the range of instruments available for responding to adverse shocks. Box I shows that Uganda stands to benefit from enhanced financial development.

2. The introduction of mobile money technologies has helped Uganda and its regional peers achieve the twin goals of developing their financial markets efficiently and expanding financial inclusion. New cost-saving financial products include mobile money products and transactions and banking services and technologies. Although Kenya has been at the forefront of this mobile money technology, Uganda, Tanzania and Rwanda have also been successful in using this technology2, with over 80 percent of all mobile money transactions in 2011 reportedly processed in East Africa (Davidson and Pénicaud’s, 2012). While the range of mobile money financial products continues to grow, ensuring that the supervisory framework keeps pace with financial innovation in the sector will be important.

Financial Development’s Contribution to Growth, the Reduction in Growth Volatility, and Financial Stability

Enhancing financial development can help boost Uganda’s growth. Regression results from Heng, Ivanovo, et. al. (2015 & 2016) show a growth contribution of financial development of 1.03 percentage point in 2013 holding all other variables constant, while in Kenya and Tanzania the growth contribution is estimated at 1.44 and 1.28 percentage points, respectively. The average index in SSA was 0.12, with an estimated growth impact of 1.20 pp. The diminishing marginal contribution of financial development to growth suggests a larger growth impact for countries at a lower level of financial development than for the more financially developed. For instance, increasing Uganda’s development index from 0.10 to that of Cape Verde’s (0.21) while holding all other variables constant, increases the growth impact by 0.86 percentage points to 1.86 pp, whereas a further increase in the index from Cape Verde to Panama (0.31) would result in an increase in the impact of 0.50 percentage points to 2.37 pp. Some lower middle-income countries (e.g. India and Sri Lanka) are closer to the inflection point, beyond which the marginal contribution becomes negative.

Predicted Contriubtion to Growth

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Financial development can also help to reduce growth volatility and financial instability. Financial development strengthens resilience to shocks by providing tools for risk mitigation and pooling. The contribution of financial development to the reduction in growth volatility is measured by the standard deviation of GDP growth, and is estimated at −1.9 pp in Uganda in 2013. The contribution to reduced financial instability is measured as the inverse to the Z-score— which compares the banking system’s capitalization and returns with the volatility of those returns—and is estimated at −0.58 pp in 2013. Uganda and other peers are in the range of the curves where additional financial development reduces growth volatility and financial instability, respectively. Beyond the inflection point, increasing financial development adds to volatility and instability, particularly if it gives rise to a higher incidence of risk-taking and costly speculation. Thus, as with the contribution to growth, Uganda stands to benefit from further financial development, in terms of reducing growth volatility and financial stability.

Predicted Contribution to Reduction in Growth Volatility

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004


Predicted Contribution to Reduction in Financial Volatility

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

3. Uganda has achieved significant gains in expanding both the number and range of financial service providers and products. It achieved among the lowest share of the population excluded from access to financial services among the SSA countries reviewed by FINSCOPE, after accounting for nonbank formal and informal credit channels3. The rapid growth in utilization rates achieved between 2010 and 2015 has established Uganda as an emerging industry leader, with over 21 million registered users and mobile money transactions valued at 44 percent of GDP.


Sub-Saharan African Countries: Financial Inclusion

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Source: Finmark Trust, Finscope Survey
  • In addition to progress with respect to mobile money transactions, data from the World Bank’s Global Financial Inclusion Database show a significant rise in the percentage of individuals aged 15 and older holding an account at a bank or another type of financial institution from 20.5 percent in 2011 to 27.8 percent in 2014, bringing Uganda closer to the average for Sub-Saharan Africa.

  • FINDEX data also show a reduction in the gender gap in account ownership between 2010 and 2015, in contrast to several regional peers.


Account at a Financial Institution

(percent of age 15+)

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Source: World Bank’s Global Findex (Global Financial Inclusion Database)

Account at a Financial Institution, Gender Gap

(percent of age 15+)

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Source: World Bank’s Global Findex (Global Financial Inclusion Database)

4. These gains notwithstanding, more needs to be done to enhance access to financial services in Uganda, to boost Uganda’s growth potential (Figure 1).

  • Commercial bank penetration rates in Uganda (2.5 commercial bank branches per 100,000 adults in 2010), were below rates in Rwanda (4.8) and Kenya (4.9), and registered smaller increases than both Kenya and Rwanda over the five-year period.

  • Commercial bank deposits and loans rose to 16.9 percent and 14.5 percent, respectively in 2015—but these were among the lowest increases observed within the EAC.

  • Data from the IMF’s Financial Access Survey show that although access to automated teller machines (ATMs) increased from 3.5 to 4.6 per 100,000 adults between 2010 and 2015, several East African Community (EAC) countries achieved higher access levels and registered bigger gains than Uganda over the five-year period.

Figure 1.
Figure 1.

Uganda: Access to Financial Services

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Source: IMF Financial Access Survey Database.

5. World Bank Enterprise Survey data indicate the presence of gaps in firms’ financial access levels vis-a-vis regional peers, with potentially adverse consequences for productivity (Figure 2).

  • Although 87 percent of Ugandan firms surveyed reported having access to either a checking or savings account, consistent with the SSA average, only 10 percent of firms reported having access to a bank loan or line of credit—less than half of the average for SSA and the lowest level of access reported after South Sudan.

  • Surveyed firms in Uganda report that over 80 percent of their investments are financed internally—higher than the average for SSA (74 percent) —while only 3 percent of their investments are financed by banks, in contrast to the SSA average of 10 percent.

  • Although just 20 percent of Ugandan firms surveyed identified access to finance as a major constraint, on par with Kenya, this percentage was much higher among manufacturing firms (40 percent) and large firms numbering 100 or more employees (41 percent).

Figure 2.
Figure 2.

Uganda: Access of Firms to Financial Services

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

  • Equity participation, however, was reportedly the highest in Uganda (12.6), and more than double the share in SSA (5.4 percent). However, only eight domestic companies are listed on the Uganda Stock Exchange, and the last IPO took place in 2012.

  • The proportion of Working Capital financed by supplier’s credit in Uganda (3.3 percent) was the lowest within the EAC and lower than the SSA average (7.9 percent). The proportion of working capital financed by banks was also low relative to several EAC peers and 30 percent below the SSA average.

B. The Financial Development Index

6. Uganda’s financial system is dominated by its banking sector, which accounted for 79 percent of financial system assets in 2012. Deposit-taking institutions licensed by the Bank of Uganda comprise commercial banks (Tier I), credit institutions (Tier II), and microfinance deposit-taking institutions (Tier III). There were 31 regulated financial institutions in Uganda as of 2014—25 banks and 3 credit institutions and 3 microfinance deposit-taking institutions. However, with the failure of Crane Bank in October 2015, the number of banks has fallen to 24. Parliamentary approval of the Tier IV Microfinance Institutions Act in July 2016 supported the establishment of a Microfinance Regulatory Authority to complement the BoU’s supervision of the sector.

7. The adoption of a comprehensive financial index facilitates a more systematic benchmarking of Uganda’s overall financial development and analysis of the impact of financial development on growth and financial stability. In this regard, this paper utilizes the index of financial development adapted by Heng, Ivanova, et. al. (2015 & 2016), based on the analytical framework developed by Sahay et. al. (2015), to benchmark Uganda’s progress over time and relative to its peers. It also examines financial development gaps, computed as the deviation of the financial development index from a prediction based on economic fundamentals—such as per capita income, government size, and macroeconomic stability—both over time and relative to a peer group comprised of other members of the EAC and Lower Middle-Income countries, given Uganda’s objective of achieving middle-income status.

8. The Financial Development Index (FDI) is comprised of two components: financial institutions and financial markets, with each component disaggregated into access, depth, and efficiency subcomponents. Each sub-component is in turn constructed based on several underlying variables that measure development in each subcategory (see Text Table below). The series used to compute the index are as shown in Figure 3. The database is comprised of 122 countries for the period 1995-2014, based on data availability. All data listed in Figure 1 were normalized into an index ranging between zero and 1. Indices for each subcomponent—Financial Institutions Access (FIA), Financial Institutions Depth (FID), Financial Institutions Efficiency (FIE), Financial Markets Access (FMA), Financial Markets Depth (FMD), and Financial Markets Efficiency (FMD)—were created by aggregating the underlying indicators shown below using equal weights within subcomponents of each index. The indicators were selected to maximize country coverage and comparability across the sample, since a balanced dataset was needed for the analytical computations. However, the trade-off is that many of the indicators that capture the latest financial innovations, particularly in the Mobile Money industry are not included—thereby understating the degree of financial development in Uganda and elsewhere in the EAC.

Figure 3.
Figure 3.

Financial Development Index

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

C. Trends in Financial Development Indices

9. Uganda’s composite financial development (FD) index rose sharply at the start of the review period, but moderated thereafter. The data show a sharp increase in the index in the mid-1990s, stemming from the rise in the financial institutions (FI) index, as the authorities liberalized financial policies within the context of successive Fund-supported programs. During this period, the Bank of Uganda (BoU) liberalized interest rates, restructured weak banks, and strengthened financial supervisory oversight—the latter culminating in the introduction of risk-based supervision and the enactment of the new Financial Institutions Act in 2004.


Uganda: Financial Development Index

(Index, Highest Level = 1)

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Sources: IMF Staff Calculations

10. Uganda’s financial development score was lower than the average for Sub-Saharan Africa. A comparison of Uganda’s relative performance vis-à-vis regional comparator groups in 20134 shows that Uganda’s overall financial development index rating (0.10) was below the average index for SSA5 (0.12) and for low-income countries (LICs) (0.13), and that weaker performance was attributable to both the financial institutions and markets indices.

11. Uganda’s financial development also fell short of other EAC and lower middle-income peer countries.6 This reference group is of interest given the Uganda’s aspirations of reaching middle-income status. Uganda began the review period with a low overall composite index and was outpaced by other similarly ranked during the review period—namely, Zambia, Armenia, and Cameroon, each now classified as lower middle-income countries. Each of these countries experienced a significant increase in their financial institutions index relative to the benchmark during the review period in contrast to deteriorating gaps observed in Uganda (see below). The median composite FDI for this reference group was 0.15, and the FDI score was 0.13 in Kenya and 0.12 in Tanzania, relative to 0.10 in Uganda. It is noteworthy, however, that the relative performance of Uganda’s Financial Market Development (FMD) index was stronger than that of its Financial Institutions Development Index. Uganda’s FMD ranking exceeded that of seven lower middle-income countries, and increased by over 400 percent during the review period, albeit from a very low base.


Components of Financial Development Index by Region


Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Sources: IMF Staff Calculations.

Financial Development Index

(Composite Index)

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Source: IMF Staff calculations.

12. During the 1990s, the BoU was proactive in encouraging competition by licensing new banks. As a result, the subsequent rise in the Financial Institutions Access Index (FIA) largely reflects the expansion of bank branch networks and ATMs. However, growth in the financial institutions index was much more muted after the initial surge of reforms in the 1990s, as the increase in competition and contestability in retail banking failed to translate into further gains in cost efficiency and reductions in interest rate spreads. In 2009, the BoU also facilitated the launching of innovative mobile payments products,, which helped to expand financial access—initially through mobile phone technology enabling customers to send and receive money without a bank account.t7 Mobile money services have since evolved, as individuals can now: save and obtain loans through their mobile money accounts; send and/or receive money to and from their mobile bank accounts; and engage in cross-border money transfers to selected East African countries using mobile money.8 However, mobile money transactions that are not linked to bank accounts are not captured by the index due to existing data limitations.


Uganda: Financial Institutions Index

(Index, Highest Level = 1)

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Source: IMF Staff calculations.

13. The financial markets index stagnated at the start of the review period and then experienced rapid growth (from a very low base) between 2002 and 2010. It then declined in 2011-13 during the political electoral cycle, which weighed on economic activity and on the equity counters. In general, the performance of the financial markets index was dominated by the financial markets depth index, which experienced a sharp increase from 2005 onwards, reflecting the growth of the stock market following its inception in January 1998. However, its operations still remains on very small scale, with only eight local listings, limited corporate bond issuance, and very low capitalization (about 4.6 percent of GDP in 2016).


Uganda: Financial Markets Index

(Index, Highest Level = 1)

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Sources: IMF Staff Calculations.

D. Financial Gaps

14. Throughout the review period, actual financial development in Uganda was below potential. Financial gaps were computed for each of the indices and sub-indices—namely, the difference between the estimated values/benchmarks based on underlying fundamentals and actual financial development indices9. The data show that Uganda’s financial development gaps were positive, meaning below potential, throughout the review period, and that the gaps increased throughout much of the review period.


Uganda: Financial Development Gaps

(By Sub-Component)

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Sources: IMF Staff calculations

15. Uganda’s financial development gaps also exceeded those of other EAC countries and many lower middle-income peer countries. Uganda’s gaps were largely attributable to underperformance in financial institutions efficiency and depth, and financial market access.


Financial Development Gaps with respect to Country’s Own Fundamentals


Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

16. An analysis of the financial gaps by subcomponent over time reveals uneven development across the sub-indices and the impact of policy reforms. For instance, the reduction of the Financial Development (FD) gap during 2000-04 reflected stronger financial institutions development (FI), after the progressive policy reforms of the late 1990s.


Uganda: Financial Development Gaps By Sub-Component and By Period

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Source: IMF Staff Calculations.
  • The BoU’s pro-market reforms in the mid-1990s and encouragement of bank entry and nonbank competition contributed to financial institutions’ efficiency relative to potential, but did not improve financial institutions access relative to potential. More specifically, strengthened financial oversight resulted in a significant reduction of credit risk, as the NPL ratio declined from close to 50 percent in 1994 to just 2.6 percent in 2004, contributing to an improvement in the Financial Institutions Efficiency (FIE) index relative to its benchmark. At this time, the FIE gap swung from a positive gap (an average of 0.03 in 1995-99) to a negative 0.04 in 2000-04— representing overperformance relative to the benchmark. However, failure to sustain the reform momentum and translate enhanced competition (from the increase in bank entry in the 1990s) into reduced cost-to-income ratios meant that these efficiency gains were not durable. Thus, the FIE gap further deteriorated and turned positive again in 2010-14.

  • Notwithstanding the growth in the Financial Institutions Access (FIA) index in the 1990s, the data show that the positive FIA gap steadily widened. The worsening gap reflected the failure of bank branches and ATMs to keep pace with the rapidly growing adult population and other fundamentals.

  • By contrast, the Financial Markets Access (FMA) index outperformed the benchmark throughout the entire review period, reflecting the rapid growth in Uganda’s government bond market and the growth in equities’ market capitalization—albeit from a low base— with most locally-listed companies the result of divestitures of government-held shares in companies. Consistent with the rest of the EAC, the corporate bond market was less dynamic, as the development of corporate securities markets typically becomes more relevant at higher income levels (Redifer, forthcoming). In Uganda, many private businesses are mainly family-owned and shy away from the disclosures that are necessary for a listing.

  • The Financial Market Efficiency (FME) gaps were significantly pronounced throughout the review period, reflecting a low turnover ratio and low liquidity stemming from a narrow investor base and a limited number of listings.

E. Enhancing Private Credit Deepening in Uganda

17. The data suggest that the widening gap between the private sector credit-to-GDP benchmark relative to the actual credit-to-GDP ratio could be a key factor contributing to the recent economic slowdown. The private sector credit-to-GDP ratio is one of the indicators used to construct the financial institutions depth index, and is of particular relevance in the case of Uganda since its credit depth (14.6 percent in 2015) is below EAC and SSA averages (23.3 and 29.0 percent, respectively, in 2015). Using a similar approach as Al Hussainy (2011), Barajas (2013), and IMF Country Report 15/195, a panel data set comprised of 138 emerging and low-income countries for the period from 1995-2015, was used to estimate the benchmark ratio of private sector credit to GDP. The fitted values from a first-stage regression of private sector credit depth on underlying fundamentals10 were taken as the underlying credit depth benchmark. The specific results from this exercise were consistent with the findings of Heng, Ivanova (2015) noted above, and confirm a gap in the ratio of credit to the private sector-to-GDP in Uganda, from about 2003, which intensified from about 2009 until the end of the review period. The latter period from 2009-15 coincides with the sharp break in trend growth in Uganda, stemming in part from negative productivity growth in agriculture and industry, as well as unproductive real estate investment52.


Uganda: Credit to the Private Sector -Actual versus Benchmark and Real GDP growth

(In Percent)

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Sources: Bank of Uganda and Fund Staff Estimates.

18. Following (Al Hussainy (2011), Barajas (2013), and IMF Country Report 15/195), the credit depth and gap were modeled as a function of policy variables and exogenous factors53. Equation (4) is representative and the variation captured by the model is sufficient to nearly close the private sector credit gap observed in 2015—the latter estimated at 8.0 percent (Table 1). 54 Financial stability factors, external flows and international country risk were found to be the main determinants of the variation in credit depth. The text chart illustrates the contribution of the variables with the largest impact, and the remaining significant variables are included in the category “other”.

  • The effect of interest rate spreads stands out as particularly relevant, with high spreads contributing to a significant reduction in credit depth. The NPL ratio also had the expected sign but a much smaller impact (included in “other”), based on the panel dataset, and could differ for Uganda-specific data.

  • Also, significant were the International Country Risk Guide (ICRG) composite variable (a barometer of sovereign and financial risks potentially impacting bankers’ willingness to lend—with a higher score connoting lower risk) and trade openness—the latter suggesting that trade credits are an important component of private credit demand.

  • Macroeconomic stability (included in “other”) also helped to underpin improvements in credit depth55.


Uganda: Private Sector Credit-to-GDP Ratio

(Contribution, 2015)

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Sources: IMF staff estimates.

F. Conclusion

19. Raising the credit-to-GDP ratio will require addressing the root causes of high interest rate spreads and high cost of finance—the subject of forthcoming joint research with the Bank of Uganda. Average lending rates have exceeded 20 percent since mid-2011 and were 23.1 percent at end-February 2017, while implicit deposit rates averaged 13 percent. Lending rates are high in both real and nominal terms, even by regional standards. According to the Economic Forum for Global Competitiveness Report (2016-17), Uganda ranks 120th out of 138 countries in terms of affordability of financial services. Moreover, household and enterprise surveys suggest that the high cost of finance and high collateral requirements serve as a binding constraint on credit growth.


Interest Rate Spreads – Regional Comparators


Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Sources: World Development Indicators Database, World Bank

20. Strengthening the credit infrastructure will help to reduce credit risk and enhance banks’ willingness to lend. Credit reporting systems could be enhanced by increasing the number of users and contributors and expanding credit profiles. In addition, creditor rights should be strengthened, including through reducing the cost of collateral recovery; and expanding collateral access through an enlargement of the collateral and land registries. Finally, the scope and coverage of credit bureaus should be expanded to include other nonbank credit-related transactions, and review collateral enforcement.


Credit Bureau Coverage

(percent of adults)

Citation: IMF Staff Country Reports 2017, 207; 10.5089/9781484309360.002.A004

Source: World Bank Doing Business 2017

21. Credit growth will also be enhanced through financial innovations in mobile money and banking, agency banking, and micro-banking. Notwithstanding the important contribution of mobile money to financial inclusion, it will be important to increase the contribution of both mobile money and banking to both savings mobilization and credit extension. In addition, the implementation of agency banking and growth of micro banking will help to extend financial access to rural areas. It would also be important to strengthen the regulatory framework to ensure that regulation of these industries keeps pace with financial innovation, and in this regard, the adoption of an appropriate mobile money policy would be helpful. Approval of the regulations for agency banking should also be fast-tracked.

22. Liberalization of the insurance sector can help to increase the scope for long-term finance and capital market development can make a bigger contribution to financial development. Passage of the Retirements Benefits Sector Liberalization Bill, currently before Parliament, could enhance the availability of long-term finance for lending to MSMEs by increasing the number of participants and insurance products. Uganda’s insurance penetration rate is among the lowest in the EAC, and is one of the factors causing the low financial institutions depth observed earlier. There is significant scope to boost financial development by introducing products that can help individuals and businesses to mitigate financial risks—such as the provision of insurance for farmers, which can help to contain the economic impact of drought. However, given the likely correlation of in-country risk, a viable pooling of risk may necessitate the adoption of regional and/or international insurance solutions. Finally, there is scope to broaden capital markets development through greater corporate bond issuance. In this regard, staff recommends further review of the newly launched Capital Markets Development Master Plan, with a view to formulating an appropriate strategy for addressing the challenges that have constrained Uganda’s capital market development. Such proposals include: enhanced sensitization to boost the public’s awareness of the potential benefits of capital market development; addressing high transaction costs; and improvements in the capital market infrastructure—by further strengthening the legal, regulatory and supervisory framework and improving the overarching policy framework for capital markets development.

Table 1.

Uganda: Estimated Equations

article image
Source: IMF Staff calculations.Standard errors underneath coefficients.*** p<:0.01, **p<:0.05, * p<:0.1


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Prepared by Ruby Randall (IMF) and Elizabeth Kasekende (BoU).


It is important to note that mobile money differs from mobile banking. While individuals can now easily send money to their mobile money account from their bank accounts using a cell phone, several unbanked mobile money users do not own a bank account but are able to use mobile banking facilities.


Formally financially included represents individuals 16 years or older who have/use financial products/services provided by a financial service provider that is regulated or officially supervised; Informally included represents individuals 16 years or older who use financial mechanisms not provided by a regulated or supervised financial institution; and “Financially excluded” represent individuals 16 years or older who have no financial mechanisms and rely on informal channels for saving, borrowing, and remitting; their transactions are cash-based or in-kind.


2013 was latest available data period.


Index excludes South Africa.


Current country income classifications as listed by the World Bank, Sub-sample includes all EAC and lower middle-income countries included in the Heng, Ivanova dataset.


In Uganda, one is required to register for mobile money using a national ID card. A process that is much easier than opening a bank account. Several unbanked mobile money users do not own a bank account to use mobile banking facilities


The transfer of transactions across selected East African countries started in 2015 with Kenya’s Safaricom partnering with Tanzania’s Vodacom, Rwanda’s MTN, and, Uganda’s MTN to introduce cross border transactions with uniform prices across countries (Kariuki and Gicobi, 2015; Ochieng, 2015).


Fundamentals included: initial GDP per capita, government consumption, population growth, the inflation rate, trade to GDP, average years of schooling, size of the shadow economy ranking), Financial Openness Index, Rule of Law Index, and Legal Origins.


Fundamentals included: (i) the log of GDP per capita and its square; (ii) the log of the population as a proxy for market size; (iii) the log of population density, proxying for ease of service provision; and (iv) the log of the age dependency ratio.


Selected Issues Paper, “Growth diagnostics.”


See Barajas (2013) for an exposition of the full model. The equation used in this paper is in line with this paper and presented in Table 1.


The coefficients in each of the estimated private sector credit equations all yielded the expected signs and most were significant at better than the 5 percent significance level. In 2015, Uganda’s private credit-to-GDP ratio was 14.6 percent, and the model generated a fitted value of 13.2 percent.


These contributions are part of a comparative static exercise that holds constant the influence of all other factors, and is therefore meant to be only illustrative.

Uganda: Selected Issues
Author: International Monetary Fund. African Dept.