BOOK REVIEW -- THE LEXUS &THE OLIVE TREE VS CHIP WAR

I recently read ChipWar by Chris Miller — a riveting account of how the semiconductor became the world’s most important technology and, by extension, the nerve centre of 21st-century geopolitics. As I turned the pages, I couldn’t help but contrast its thesis with that of Thomas Friedman’s The Lexus and the Olive Tree that I read about two decades ago.

Reading the two side by side, one gets a sense of how the world has changed — and hasn’t. Friedman was writing at a time when the buzzword was “globalisation,” and there was a kind of religious conviction that the market, the internet, and capital flows would knit the world into a single prosperous village. That vision now feels quaint, almost naïve. Miller’s narrative, meanwhile, is one of choke points, technological bottlenecks, and the fragility of interdependence.

The two are particularly interesting in understanding the happenings in the Middle East, I think.

Friedman’s “Lexus”, which name I recently learnt was an abbreviation for “luxury export to the US”,  was the symbol of progress: high-tech, efficient, and global. His “Olive Tree” was the reminder that identity, culture, and history still matter — and often collide with the Lexus in unpredictable ways. In Gaza, in southern Lebanon, in the Red Sea, we are witnessing just such a clash. The global supply chain hums along, until it hits a blockade — metaphorical or literal — thrown up by actors who feel excluded or endangered by the global system.

Friedman’s hope was that the gravitational pull of the global economy would discipline states and societies into predictable behaviour. You don’t throw rocks at the Lexus showroom if you’ve got one parked in your garage. But as the current crisis shows, not everyone got the Lexus, and the Olive Tree has deep roots. In fact, the more globalised the world has become, the more some have doubled down on identity, resistance, and sovereignty.

Where Friedman saw a flattening world, Chris Miller sees a world stratified by silicon — specifically, the chip. Chip War

argues that semiconductors are not just components of technology but weapons of statecraft, economic leverage, and military dominance. The entire global system runs on chips — from AI and cloud computing to missile guidance and cyber surveillance. And crucially,

no one country controls the whole supply chain.

The Middle East, too, is entangled in this chip narrative. Iran has been desperate to circumvent sanctions by building its own tech capacity. Israel’s dominance in drone technology, cyber tools, and precision warfare depends on cutting-edge chips. The Gulf states, meanwhile, are investing in AI and digital infrastructure as part of their post-oil futures. And yet, almost none of them can produce the chips they need. They are at the mercy of a fragile, globally dispersed supply chain — one increasingly weaponised by the likes of Washington and Beijing.

The chip is the new oil — but it’s even more volatile.

Take the Houthis in Yemen. A militia with rudimentary drones has managed to disrupt global shipping in the Red Sea, sending freight costs soaring and rerouting traffic around Africa. It’s a vivid example of what Miller and Friedman both recognised in different ways: globalisation has empowered non-state actors in unprecedented ways. The Houthis don’t need to hold a capital city to project power; they just need a drone, a grievance, and a global market to disrupt.

And the consequences aren’t confined to the region. A spike in insurance premiums in the Suez Canal or a supply delay for Taiwanese chips affects the global economy. The butterfly effect of a regional flare-up now has boardroom and battlefield consequences from Frankfurt to Free Town.

This fragility — what Miller calls “the bottleneck economy” is the reality we now inhabit. Whether it’s ASML’s lithography machines in the Netherlands, or Taiwan’s TSMC factories, or Israel’s tech corridors, the supply chain that undergirds the global economy is a high-wire act. And when tensions rise in the Middle East, the whole system wobbles.

What both The Lexus and the Olive Tree and Chip War remind us is that power is no longer just about tanks and territory. It’s about networks, chips, and narrative. And the Middle East, long seen through the prism of oil and ideology, is now a front in the battle for technological and supply chain supremacy.

But to me, perhaps the deepest insight comes from the contrast between the two books. Friedman saw a world where prosperity would temper politics. Miller shows us a world where technology is politics. And in the Middle East today, the Olive Tree hasn’t been uprooted — it has simply grown into the data centres, missile batteries, and AI command rooms of the region’s new power players.

The old conflict over identity, territory, and belief now plays out with silicon and software layered on top.

In the end, the question is not whether the Lexus can outrun the Olive Tree, or whether chips will replace bullets. It is whether we are ready to govern a world where both coexist in a deeply unstable equilibrium. A world where prosperity and progress are still possible — but only if we understand the new rules of power.

And those rules are being written — in code, in silicon, and increasingly, in the sands of the Middle East.

For a small, pre-industrial country like Uganda, the lessons from Chip War and The Lexus and the Olive Tree

are both sobering and instructive. In a world where technological supremacy defines geopolitical clout and where global supply chains are both opportunity and threat, Uganda must recognise that digital sovereignty and data infrastructure are the new frontiers of development and security. While we may not build chips, we must invest in local talent, protect digital infrastructure, and strategically align with global tech blocs.

In a world ruled by chips and chokepoints, staying non-aligned is not a strategy. It’s a vulnerability. Uganda must leapfrog wisely—choosing the right alliances, building digital capacity, and anchoring the Olive Tree in the soil of a fast-changing global order.

 

THE UGANDA BUDGET: CLOSING OLD GAPS, OPENING NEW OPPORTUNITIES

Uganda’s 2025/26 budget, clocking in at sh72 trillion—approximately $19 billion, or nearly five times the size of the country’s $4 billion economy in 1986 is a striking symbol of how far the country has come. It reflects three and a half decades of relative macroeconomic stability, revenue growth, and ambition to deliver public goods and spur transformation.

The budget’s scale is a response to both promise and pressure. It seeks to expand infrastructure, finance social programmes, repay debt, and support livelihoods. It also continues a long-term strategy to bridge historical gaps—especially in public infrastructure, created by decades of neglect during the 1970s and 1980s. Those years of political instability and economic decline left Uganda with little to show by way of roads, power plants, or functioning institutions, even as the population doubled.

Successive budgets in the 2000s and 2010s have attempted to address this backlog, and the 2025/26 budget is no exception. With sh4.5 trillion allocated to roads and sh2.3 trillion to energy, the investment continues—reflecting an understanding that without strong infrastructure, the goals of industrialisation and regional trade competitiveness will remain elusive.

The commitment to infrastructure is not new.

In 2011/12, infrastructure spending was just under sh3 trillion. A decade later, in 2021/22, it had more than doubled. In contrast, allocations to education and health— sh4.2 trillion and sh 2.8 trillion respectively in this year’s budget—have grown more slowly, often falling behind both inflation and population growth.

Infrastructure’s share of the development budget has consistently outpaced social sectors, underscoring government belief in its catalytic role. But the imbalance raises a fundamental question: are we building structures faster than we’re building the people to run and benefit from them?

Even so, legacy gaps cannot be solved with money alone.

Uganda’s Achilles’ heel has been the long and inefficient project execution cycle. Major projects such as Karuma Dam have taken far too long to complete, delaying their contribution to growth. If project timelines were shortened and efficiency improved, the country could begin to realise returns on investment faster.

At over sh96 trillion—roughly 52 percent of GDP—public debt is still within sustainable bounds by international standards. Yet the trend is worrying, particularly because of the increasing share of commercial and non-concessional loans. This year, sh19.8 trillion, or 28 percent of the national budget, will go to debt servicing alone—resources that might otherwise have gone into education, health, or job creation.

Even more pressing is the growing mountain of domestic arrears, now estimated at sh14 trillion. That figure has more than tripled since before the COVID-19 pandemic and represents unpaid obligations to suppliers, service providers, and contractors. These arrears starve the private sector of liquidity, especially small and medium enterprises that are often ill-equipped to wait months—or years for payment. Tackling this backlog must be a priority if government spending is to translate into economic activity.

On the social front, the government is pushing ahead with the Parish Development Model (PDM) and Emyooga programmes as vehicles for inclusive growth. While the national impact of these initiatives has so far been limited and uneven, green shoots are beginning to emerge.

In some districts, SACCOs have started to disburse funds effectively, with early signs of increased incomes and improved household resilience. The challenge now is to consolidate these gains and scale best practices across the country, ensuring that these programmes are not just disbursement vehicles but agents of lasting transformation.

Education and health continue to be under strain. Despite gradual budget increases—sh4.2 trillion and sh2.8 trillion respectively in this cycle, these sectors face growing burdens from a rising population, ageing infrastructure, and underpaid personnel. While the numbers suggest progress, the systems themselves remain overstretched.

On the revenue side, URA’s digitalisation and enforcement drives are projected to bring in sh32 trillion in domestic revenue. That’s a significant step up from previous years. Yet the challenge persists: the tax base remains narrow. Much of the informal economy still lies beyond the tax net, meaning the burden continues to fall disproportionately on the formal sector—already under pressure from high compliance costs and limited access to affordable credit.

Importantly, the budget allocates sh7.1 trillion to defence and security—more than the combined allocation to health and agriculture. At first glance, this might seem misaligned with social and economic priorities. But Uganda’s history offers context: without stability, development is impossible. The investment in security has underpinned the growth we see today. It has enabled long-term planning, encouraged investment, and facilitated regional trade. In a volatile neighbourhood, Uganda’s relative calm is a competitive advantage—and one that must be maintained.

That said, the balance of spending still invites scrutiny. Agriculture—the backbone of the economy and the largest employer receives just sh1.8 trillion. Tourism, a top forex earner, gets sh220 billion. Government has argued in the past that all the allocations in security, infrastructure and social services aid agriculture, but it is also true we need to ramp up investment in extension services, water for production and access to quality inputs.

The allocation to science, innovation, and digital transformation remains small relative to their potential impact. If Uganda is to harness the productivity of its youth bulge, more deliberate investment in high-growth sectors will be needed.

The 2025/26 budget reflects a country still in the thick of transition. It attempts to correct for the past, meet the demands of the present, and chart a path toward the future. The ambition is evident. The implementation, however, must improve. Without faster project execution, stronger accountability, and a more productive use of borrowed funds, the gains of today may not be enough to sustain the Uganda of tomorrow.

BANKS ARE QUIETLY WINNING — BUT FOR HOW LONG?

Uganda’s banking sector doesn’t scream success. It doesn’t thump its chest or light up headlines. But make no mistake: it is quietly, efficiently, and methodically winning.

The numbers from the Uganda Bankers Association’s 2024 report are hard to ignore. Total assets for the sector reached sh48.2trillion, up nine percent from sh44.3trillion in 2023. Net profits after tax came in at sh1.58trillion—the highest in the sector’s history—rising from sh1.45trillion a year earlier.

At first glance, this looks like a continuation of the same old story: steady growth, strong balance sheets, healthy profits. But dig a little deeper, and you’ll see a sector entering a new phase. One where scale isn’t enough. Where efficiency, caution, and digital fluency are now the currency of banking success.

Start with the deposits. Total customer deposits grew to sh39.8 trillion

, a shade over eight percent from 2023’s sh36.8 trillion. The local currency still dominates, accounting for 69.8 percent of all deposits, but that’s down from 72.4 percent the previous year. It’s a gentle signal—nothing alarming yet—that confidence in the shilling is softening at the margins. With government borrowing still crowding out the private sector and the exchange rate under pressure, depositors seem to be hedging their bets.

Then there’s the loan book. Loans and advances to customers ticked up to sh22.3trillion, up from sh20.7trillion in 2023. A respectable 7.7 percent increase. But it’s where the money is going that matters. Trade continues to eat the lion’s share at 20.9 percent, followed by personal loans, building and construction, and manufacturing. Agriculture, despite being the lifeblood of the economy, still only claims 8.3 percent of the loan pie. That’s a structural failure, not just a commercial decision.

Meanwhile, the cracks are starting to show. The Non-Performing Loan (NPL) ratio nudged upwards to 5.3 percent, from 4.9 percent last year. In absolute terms, NPLs now stand at sh1.18 trillion

, up from sh1.01 trillion. And while banks are beefing up their provisioning—sh515.2 billion set aside for bad debts, up 14.5 percent the deterioration in asset quality is a clear warning. This isn’t a crisis. But it is a reminder: growth without rigour is just a risk postponed.

And yet, despite it all, banks are thriving. Their capital base grew by 12.6 percent—from sh6.12 trillion to sh6.89 trillion—bolstered by profits and, in some cases, fresh capital injections. That’s not just a regulatory requirement. It’s a strategic decision. With the government scaling back its borrowing appetite and returns on treasury paper likely to flatten, banks are turning back to their core business: financial intermediation.

But here’s the catch.

The industry is still highly concentrated. The top five banks—Stanbic, Centenary, ABSA, Standard Chartered, and Equity—hold over half the assets and profits. The rest of the sector is jostling for relevance. And while smaller banks are growing quickly, they’re still playing catch-up. The market remains skewed, with smaller players struggling to break out of their niche comfort zones.

Digitisation, meanwhile, has gone from buzzword to baseline. Mobile and internet channels now dominate transaction volumes. The branches haven’t disappeared—but they’ve changed. They’re leaner, meaner, and no longer the centre of the banking universe. The upside? Lower costs, faster service, broader reach. The downside? Digital fraud, customer alienation, and growing concerns about transaction fees—especially for low-income users who don’t understand the fine print until it’s too late.

Still, the shift is irreversible. And the banks that have invested early in systems, security, and customer education are now reaping the benefits. They’re not just pushing apps—they’re building ecosystems. From payments and savings to insurance and microloans, the smartphone is fast becoming Uganda’s de facto bank branch.

And yet, the elephant in the room refuses to budge: cost-to-income ratios. Despite all the innovation, the sector’s average sits stubbornly above 50 percent. That’s high by regional standards and leaves little room for error if interest margins tighten. It also means banks will continue to pass costs onto customers—whether through fees, spreads, or service limitations.

So what does all this mean?

It means Uganda’s banking industry is in transition. From analogue to digital. From scale to efficiency. From top-line growth to bottom-line discipline. The profitability is real, but so is the fragility. The sector is walking a tightrope—between opportunity and exposure, between transformation and turbulence.

The Bank of Uganda has done a solid job of macroprudential supervision. Liquidity levels are healthy. Capital adequacy ratios are being met. And there’s no sign of systemic stress. But if the regulator wants to future-proof the industry, it will need to think beyond compliance. How can capital be channelled into productive sectors? How can banks be nudged to lend more to agriculture, to green energy, to local manufacturing? And how do we ensure that banking becomes a tool for transformation, not just transaction?

Because here’s the uncomfortable truth: for all their profits, banks are still not lending enough to the sectors that matter most.

And that’s not just a policy challenge. It’s a commercial opportunity.

There is money to be made in lending to agro-processing, to SMEs, to women-led enterprises. But it requires different tools, different risk models, different appetites. It requires banks to reimagine what it means to serve—not just the salaried, but the self-employed. Not just the formal, but the informal. Not just the central, but the peripheral.

Uganda’s banks, in 2024, are more profitable than ever. More digital than ever. More capitalised than ever.

But are they more inclusive? More developmental? More catalytic?

That’s the next frontier.

QUARTZ, CODE AND COFFEE: UGANDA’S TECHNOLOGICAL AWAKENING

For decades, Uganda has stood at the edge of the technological revolution—watching, importing, consuming. We bought the computers, laid the fibre, issued grand development statements—and yet, we remained a nation defined more by what we lacked than what we made.

But as the National Science Week, which opened yesterday at the Kololo Independence grounds shows, a quiet but profound shift is taking place. This time, it’s not just another government initiative. It’s a declaration: Uganda intends to become a builder.

Think about quartz, the high-grade silica sand scattered across Uganda’s valleys. For years, it sat there—unappreciated, unexploited. But a small team of Ugandan technologists and scientists has been quietly testing its potential, running pre-feasibility studies, and exploring how to refine it into metallurgical-grade silicon—the base ingredient for semiconductors, solar panels, and a host of high-tech applications.

The science is tough. Silicon is extracted by stripping oxygen from silicon dioxide—an energy-intensive process usually done using carbon sources like coal. And Uganda, as it turns out, has that too. Down south, coal deposits and biomass reserves could power a local silicon industry. It's still early, but the feasibility studies are promising. First, metallurgical-grade silicon. Then silicon wafers. Eventually, chips. That’s the roadmap.

This is not fantasy. It’s part of a broader, methodical movement gaining steam under the Science, Technology and Innovation (STI) Secretariat. These aren't vanity projects. They’re deliberate steps to rewire Uganda’s economy around innovation, value addition, and ecosystem thinking.

The emerging vision is simple but bold: move from resource extraction to resource transformation. From raw quartz to silicon. From unprocessed coffee to premium-branded exports. From importing sensors with a 70 percent defect rate to building locally with near-zero failure.

And it’s already happening.

Last week I visited the Deep Tech Center of Excellence in Namanve where engineers are prototyping, fabricating, and testing devices right here in Uganda. Local firm Innovex is building world-class sensors that meet international standards. Meanwhile, the Roke Cloud initiative is laying the groundwork for Uganda’s own cloud computing infrastructure—so our data doesn’t have to fly halfway around the world and back. These projects aren’t mere technical experiments—they are strategic acts of sovereignty.

Even artificial intelligence isn’t being left to Silicon Valley. An AI Studio is up and running, not as a government department, but as a self-organising ecosystem of volunteers, entrepreneurs, and researchers. In a country where policy has often strangled innovation, this decentralized approach is refreshing—and radical.

David Gonahasa, Team leader Industry 4.0+ at STI enthusiasm for what is happening, may make believers out of skeptics, like me, to whom all this seems too incremental. Too fragile.

That’s how real innovation begins—not with big bangs, but with proof of concept, he tells me. Like the Kampala Motor Corporation, whose buses are rolling proof that local manufacturing isn’t a pipe dream. Or the early experiments in silicon processing, showing that what we have—quartz, energy, and coal—can be more than geological trivia. They are the raw materials of a digital future.

Of course, none of this will work without a change in mindset. For years, Uganda has suffered from what you might call a “consumption complex.” We trusted foreign goods, foreign ideas, foreign experts. Our local equivalents were seen as second-best—or worse, as charity cases. But the STI approach is forcing a rethinking. Now, the focus is on outputs, not inputs. Capabilities, not checklists.

This isn’t just economic policy—it’s cultural reform.

That’s why Science Week matters. It’s not just a conference or an exhibition. It’s a mirror and a megaphone. It shows us what’s possible, and it announces to the world that Uganda is no longer content to sit on the sidelines of global innovation.

It’s also about visibility. Seventy international venture capitalists have been invited to see for themselves what Uganda has to offer. Not just pitches, but products. Not just decks, but factories. These investors aren’t being courted for handouts, but for partnership—and perhaps even a bit of surprise. Because Uganda is doing something unusual: building patiently, locally, and with intent.

To be sure, challenges remain. For instance extracting silicon at scale is still expensive. Energy-intensive processes require environmental foresight. The legal frameworks for high-tech industries are still catching up. And Uganda’s venture ecosystem is in its infancy.

But consider where we’re coming from. From a country whose economic narrative has been dominated by agriculture and infrastructure, we’re pivoting to one where microchips, sensors, cloud infrastructure, and AI studios are part of the national conversation. That’s not just development—it’s transformation.

In a sense, Uganda’s science revolution is an echo of its coffee renaissance. Once exporters of raw beans, local entrepreneurs are now roasting, branding, and selling to premium markets. The logic is the same: add value at home, keep the margins, build capability.

If we can do it with coffee, why not with quartz?

The future is being written now—by scientists, by entrepreneurs, by policy shapers who understand that real development isn’t about donor metrics or ribbon-cutting ceremonies. It’s about building capacity and retaining value.

Uganda doesn’t lack resources. We’ve always had them. What we lacked was the will to turn those resources into a foundation for innovation. That may finally be changing.

And if it does, we won’t just be another developing country tinkering at the edges of someone else’s technology. We’ll be creators in our own right—transforming quartz into code, and ambition into industry.

So join me this week at the Science Week to see what our government and more importantly our young people and scientists are up to.

 

A BITTER FAREWELL -- WHAT UMEME EXIT SAYS ABOUT UGANDA'S INVESTMENT CLIMATE

When Uganda signed over its power distribution network to Umeme in 2005, it marked one of the country’s most ambitious public-private partnerships. 

The goal? To bring efficiency, capital, and expertise into a sector long plagued by losses, unreliable service, and chronic underinvestment. 

Two decades later, Umeme exits the stage—mission largely accomplished on the technical front, but mired in a bruising legal battle that threatens to stain the legacy of the entire arrangement.

The company’s 2024 audited results read more like a legal case file than a financial report. A Ushs 511 billion loss. A balance sheet cratered by revaluation and provisioning. A contentious Buyout Amount of US$292 million (Ush1.05 trillion) left unpaid by government and now headed for international arbitration. And in the background, a government seemingly reluctant to make good on what Umeme claims are ironclad contractual obligations.

Make no mistake: Umeme’s operational track record is strong. Energy losses cut from 38 percent to 16 percent. Over $860 million invested in the grid. Two million-plus customers connected. In 2024 alone, electricity demand rose by 10.8 percent, driven by reliability improvements and an aggressive connection rollout. Umeme may not have been perfect—tariff issues and customer perception always lingered—but it largely delivered on its mandate.

But now, with the concession expired in March  and assets retransferred to Uganda Electricity Distribution Company Limited (UEDCL), the focus has shifted to a high-stakes legal showdown. Umeme claims it is owed the Buyout Amount in full, plus interest. The government disputes the calculation. With both parties dug in, arbitration proceedings have been triggered in London, as per the Concession Agreement.

This is where things get messy—and expensive.

International arbitration is no quick fix. Even in straightforward commercial disputes, timelines can stretch from 18 months to 3 years, depending on complexity, evidence gathering, and availability of tribunal members. For Uganda, this means the cloud of the Umeme dispute could hang over its investment narrative for the better part of the current political term. Worse, if the arbitrators side with Umeme, government may find itself on the hook for not just the US$292 million principal, but contractual interest which, if compounded, could push the liability well north of US$350 million.

To put that in context, that’s more than the annual budget for Uganda’s Ministry of Energy. And unlike domestic obligations, arbitration awards carry international enforceability—meaning non-payment risks asset seizures abroad, credit downgrades, and frozen investor appetite.

And here's the real danger: regardless of outcome, the very existence of this dispute is already damaging.

It paints a picture of Uganda as a country where concessions end not with handshakes but with spreadsheets, summons, and public notices. For foreign investors looking at Uganda’s infrastructure, oil and gas, or manufacturing sectors, the message is sobering. “What happens when my project ends?” “Will I get what I’m owed?” “Will the rules suddenly change?” These are the kinds of questions now echoing in boardrooms and investment committees across the region.

Uganda has worked hard over the last two decades to market itself as a reliable investment destination. Liberalised capital markets. A central bank that largely minds its business. Predictable tax and trade regimes. But as any investor will tell you, the real test of a market isn’t when you enter—it’s how you're treated when you exit.

The Umeme case now sits at that crossroads.

The government still has room to salvage the narrative. It could settle before arbitration heats up, agreeing on an audited figure and payment schedule that reflects the country's fiscal realities. It could signal willingness to uphold contractual terms—even amid disagreement. Or, it could double down and risk a binding award that could send shockwaves through its entire PPP strategy.

Because here’s the thing: Umeme is not an isolated case. Uganda has ambitions to build roads under PPPs, develop power dams, oil pipelines, and even airport infrastructure. All these projects will require long-term capital. And long-term capital, by its very nature, hates uncertainty at the end of a project. What investor wants to spend 20 years building an asset only to be told at the end, “let’s talk again in court”?

None of this is to absolve Umeme of scrutiny. Its 2024 report shows rising operating costs (up 31 percent) and a dip in operating cashflows. But these are transitional pains, not breaches of mandate. What matters now is not just who wins in London—it’s how Uganda is seen handling a major concession exit under the microscope.

Uganda’s power sector owes much of its turnaround to the structure and discipline imposed by the Umeme concession. But if that same sector becomes the graveyard for investor trust, the long-term cost could dwarf any unpaid Buyout Amount.

Trust is what built the grid. It must also power the next phase of Uganda’s growth. Arbitration may resolve the numbers. But the reputational damage will need something deeper—political maturity, legal clarity, and the humility to honour the deals we sign.

UGANDA BUDGET BETS ON BRAINS OVER BRUTE FORCE

In a world where the taxman is never far behind and the budget speech is often a catalogue of fresh levies, new charges, and revised rates, Finance Minister Matia Kasaija’s decision to announce no new taxes in the Sh72.1 trillion budget for FY2025/26 was—dare I say it—a minor fiscal miracle.

Now, let’s not kid ourselves. The government still needs money. The deficit is a chunky 7.6 percent of GDP. The debt clock keeps ticking. But this year, instead of reaching deeper into the same old pockets, Treasury took a more strategic route—don’t tax more, tax better.

It’s a position as rare as it is refreshing. And in this economic moment, it’s also very, very wise.

After all, Uganda is still nursing its wounds. COVID-19 may be a distant memory, but its economic scars aren’t. Businesses—especially the small and informal—are still playing catch-up. Add to that a volatile global economy, rising debt servicing costs, and soft consumer demand, and it becomes clear: this is not the time for new tax burdens.

Instead, the government wants to fix the system. URA is doubling down on digital tools—EFRIS, DTS, automated audits, the whole alphabet soup—to bring more efficiency into tax collection. Compliance gaps in rental income, digital commerce, and high-net-worth individuals are in the crosshairs. The informal sector, long treated like a rounding error, is finally getting structured attention.

It’s the right call. Not just because it spares the taxpayer some pain, but because it signals a subtle shift in philosophy: that revenue is a function of trust and efficiency, not just compulsion.

All this is happening against a relatively sunny economic backdrop. Growth this year is clocking in at 6.3 percent, inflation has eased to 3.4 percent, and the Ugandan shilling has defied the odds to become the most stable currency in Africa, at least according to the IMF’s International Financial Statistics. GDP now stands at Sh226.3 trillion—up from Sh203.7 trillion last year—and is expected to touch Sh254.2 trillion next financial year.

There’s a new swagger in our export numbers too. Coffee earnings doubled to $1.83 billion. Industrial exports are taking up more space in the basket. And the country is finally getting serious about monetising what it grows. In the Harvard Economic Complexity Index, Uganda is becoming more sophisticated, more “complex,” punching above its income level. For once, the story of economic transformation is more than just speechwriter flair.

But scratch the surface, and a few uncomfortable truths peek through.

"Domestic arrears, remain a festering sore. By conservative estimates, government owes its suppliers north of Sh14 trillion—money that many SMEs will never see in full or on time. The budget speech mentioned them, sure, but not in the tone of urgency the crisis demands. You can’t talk up private sector-led growth while stiffing the very businesses you contract. It’s like pushing someone off a cliff and then offering them climbing gear.

These arrears distort more than just balance sheets. They ruin creditworthiness, lead to layoffs, and undermine tax compliance. Worse, they fuel a quiet despair among entrepreneurs who once believed doing business with government was a ticket to growth.

And then there’s the not-so-quiet elephant in the room: corruption.

The budget offers the usual playbook—digitise procurement, automate tax systems, roll out e-whatever. That’s all good. But what’s missing is the political spine to back it all up. What good is an electronic audit trail if the audit ends in a dusty drawer? If prosecution is selective? If impunity is routine?

We’ve seen too many grand digital tools defeated by small brown envelopes.

Even more concerning is the rise of off-budget mechanisms—special funds, trusts, "strategic investments"—that increasingly escape the traditional accountability radar. If the public purse is leaking through side doors, it won’t matter how tightly you lock the front gate.

And yet, there is some hope.

The budget’s Shs2.43 trillion investment in wealth creation—through PDM, UDB, Emyooga, and others—is a continuation of the government’s bet on grassroots economic transformation. It’s an effort to turn more Ugandans into producers, not just consumers of the economy. The Sh1.86 trillion earmarked for agro-industrialisation, the big push in infrastructure (Sh6.92T) continues, and the funding for science and technology (Sh835B) all point to a state that wants to do more than just spend—it wants to build.

But none of it will work unless the state starts paying what it owes, curbing what it leaks, and collecting what it’s supposed to—fairly, consistently, and transparently.

So yes, let’s cheer the absence of new taxes. It’s a bold political decision and a clever economic one. But let's also not forget: doing nothing is not the same as doing enough. Tax reform without public sector reform is just clever accounting. A bigger budget won’t mean better lives unless the money reaches the intended beneficiaries.

The best part of this budget may be what was left unsaid: no new taxes. Now let’s hope it’s followed by no more arrears, no more excuses, and maybe—just maybe—no more corruption.

 

UGANDA'S BUDGET PLAN FACES HARD TRUTHS

Today, June 12th, 2025, Finance Minister Matia Kasaija will rise before Parliament to read Uganda’s national budget, weighing in at a hefty sh72 trillion. 

That number alone is staggering. Two decades ago, Uganda’s national budget stood at just over sh4 trillion. This represents a compounded annualised growth of about 15 percent  or more than twice the average annual growth of the economy duing the same period. 

In 2005, the government operated with a modest financial envelope largely dependent on donor aid and constrained by a narrow tax base. Fast forward twenty years, and the budget has grown more than seventeen-fold—an extraordinary leap that reflects both inflation and a genuine broadening of the economy.

This growth tells a story. Some of it is positive: domestic revenue collection has improved, the private sector has deepened, and public infrastructure has expanded. But it also tells of our growing appetite for debt, recurrent expenditure, and a state machinery that has ballooned over time—sometimes without matching output.

The National Budget Framework Paper (NBFP) that underpins this year’s budget is heavy on aspiration. Its theme—“Full Monetization of Uganda’s Economy through Commercial Agriculture, Industrialization, Expanding and Broadening Social Services, Digital Transformation and Market Access”—ticks all the right boxes. It is a bold vision of structural transformation, if ever there was one. The question is: do the numbers, and more importantly the execution, match the rhetoric?

On paper, government aims to propel the economy past  growth next year, en route to double-digit expansion once commercial oil production comes onstream. The economy is projected to hit sh250 trillion by 2025/26, with per capita income rising to $1,339. The macro outlook is buoyant, inflation is below three percent, and exports are rebounding. But if Uganda has learned anything over the past two decades, it's that development does not reside in GDP forecasts. It lies in tarred roads that go somewhere, school roofs that don’t leak, and health centres that have medicine and staff. That’s where the real audit begins.

The NBFP places infrastructure front and centre, as it always does. Roads, electricity transmission, the Standard Gauge Railway, and the near-complete Kabalega Airport all receive top billing. These are necessary investments, no doubt. But Uganda has a troubling history of building things that don’t work—or that work only after years of delays. The Karuma Dam still haunts our planning psyche, completed on paper yet underutilised . Projects are announced, budgeted, and even launched, but coordination and oversight remain our Achilles’ heel. The issue is not money. It is follow-through.

Meanwhile, agriculture—the lifeline of the majority of Ugandans—remains scandalously underfunded. Just 2.5 percent of the budget is earmarked for a sector that employs over 70 percent of the population and contributes 24 percent to GDP. The NBFP speaks earnestly about agro-industrialisation, value addition, irrigation, and warehouse receipt systems. 

But the numbers don’t back the talk. 

Farmers still lack extension services, affordable credit, and basic infrastructure. If we are serious about lifting people out of poverty, especially in rural areas, this imbalance must be corrected. You don’t monetize an economy by starving its core.

Then there’s the issue that quietly cripples every budget cycle—youth unemployment. Uganda is the second-youngest country in the world. Every year, over half a million youths enter the job market, and most find no foothold. The NBFP gestures at solutions—the Parish Development Model, Emyooga, UDB credit—but these are fragmented interventions. What’s missing is a national employment strategy that connects education to opportunity, apprenticeships to actual jobs, and the informal sector to scalable enterprises. We keep trying to solve a structural problem with project-level fixes. It hasn’t worked before, and it won’t now.

But no problem is more corrosive to our fiscal credibility than the domestic arrears overhang. 

As the Finance Minister delivers his sh72trillion speech, it’s worth remembering that over sh13.8 trillion in unpaid government bills lurk in the shadows. This includes overdue payments to contractors, suppliers, pensioners, and court awardees. The NBFP proposes to clear sh1.4 trillion this financial year—an improvement from the laughable sh200 billion previously allocated. But even at that rate, it would take a decade to clear the current stock, assuming not a single new shilling is added to the arrears pile—which, of course, is fantasy.

This isn't just a bookkeeping issue. Domestic arrears are strangling the private sector. Businesses that trusted government contracts are folding. Banks are tightening lending. Job creation is stalling. It’s a silent crisis—one that the government has so far been unwilling to confront head-on. The fact that we continue to accrue arrears even as we trumpet revenue growth speaks to deeper issues of fiscal discipline and accountability. If Uganda were a company, it would be on the verge of default.

And yet we lose just as much—if not more—to corruption. According to estimates, Uganda bleeds over sh2 trillion annually through procurement fraud, ghost payments, and tax evasion. That’s nearly equivalent to what we spend on the roads budget. Every year, the Auditor General uncovers the same rot. Every year, we shrug. Until we make examples of the corrupt—not through commissions of inquiry, but through convictions and asset recovery—our budgetary ambitions will remain castles built on sand.

There are bright spots. The government’s push for digital transformation is timely and potentially transformative. Fintech and mobile money are already revolutionising access to financial services. If supported by smart regulation, public investment in digital infrastructure, and robust consumer protections, Uganda could leapfrog decades of development barriers. But again, the follow-through must be real. It’s not enough to build an app or lay fibre optic cable. We need to ensure that farmers, traders, students, and health workers can actually use these tools to improve their livelihoods.

And then, of course, there’s oil. With Tilenga and Kingfisher past the halfway mark and the EACOP progressing, first oil is a real prospect in the coming financial year. But this is a double-edged sword. Oil can lift us, or it can wreck us. If we allow oil revenues to feed bloated bureaucracies and politically driven consumption, we will have wasted the opportunity of a generation. If, on the other hand, we invest in human capital, infrastructure, and industrial transformation, we might yet chart a different course. It’s a choice—not an inevitability.

So as the Finance Minister delivers the sh72 trillion budget this afternoon, we would do well to listen not just to what is said, but to what is not. We should scrutinise not only the allocations, but the arrears. Not only the promises, but the history. Because ultimately, budgets are not about figures. They are about faith. Faith that when government says it will build a road, the road will be built. That when a contractor finishes a job, he will be paid. That when money is allocated to a school, children will learn.

Until we restore that faith, even sh72 trillion won’t be enough.

TWO FOR THE PRICE OF ONE: MTN'S FINTECH SPIN-OFF COULD BE UGANDA'S SMARTEST INVESTMENT YET OR ....

There’s a quiet disruption underway at MTN Uganda, and it’s dressed in the language of shareholder value, strategic clarity, and platform transformation. 

But while the telecom giant’s planned spin-off of its mobile money arm into MTN New FinCo has been marketed as a win-win for investors, a closer reading suggests that shareholders—especially institutional ones—need to bring both their optimism and their caution to the table.

Let’s start with the promise. MTN Uganda’s fintech operations—anchored in MTN Mobile Money (MoMo)—are being carved out into a new entity, MTN New FinCo, which will eventually be listed separately on the Uganda Securities Exchange. Shareholders of MTN will maintain an economic interest in the new company through a Trust, and later receive direct shares when the new entity lists in 3 to 5 years.

From a growth story perspective, the pitch is compelling. MoMo has evolved from a side hustle to a fintech powerhouse, posting sh250 billion in profits in 2024 alone. Projected forward, a bull-case model sees MTN New FinCo dividends rising by 18 percent annually and share prices doubling within five years of listing. Investors who buy MTN stock now stand to benefit from both the telecom cash cow and the high-growth fintech colt.

But those who believe in the power and integrity of public markets must be both thoughtful and a bit careful. For all its financial appeal, this is not a straightforward spin-off. It is a restructuring built around legal complexity, and one that quietly shifts a large part of MTN’s value into a structure that lacks the full accountability and transparency of a publicly listed company.

Here’s the issue: rather than listing MTN MoMo directly by introduction—a path that would have preserved the public ownership and disclosure framework—MTN has chosen to transfer MoMo’s operations into MTN New FinCo, a private company. Minority shareholders’ interests in this new company will be held not directly, but through a trust. This trust is not listed, nor is it subject to the Capital Markets Authority (CMA) or Uganda Securities Exchange (USE) disclosure rules.

This might seem like a clever workaround—especially with promises of future unbundling—but it introduces significant risk and uncertainty. Moving a public company’s most valuable asset into a private trust structure

creates opacity and erodes investor protections in ways that should give shareholders pause.

Among the most pressing concerns:

• Governance Gaps: The trust is unlikely to meet the governance standards required of listed entities. Its memorandum and articles of association (memarts) will not be subject to CMA review or public oversight.

• Disclosure Loopholes: MTN New FinCo, being a private company, will not be bound by the same continuous disclosure obligations as listed firms. Investors may no longer receive timely, detailed financial reports or material updates.

• Loss of Minority Protections: Listed companies are required to protect minority shareholder rights. These safeguards—including voting rights, access to information, and equitable treatment—may be diluted or lost entirely in the trust structure.

• Board Composition and Accountability: The board governing MTN New FinCo is not the board that investors originally backed when they bought MTN shares. The separation breaks the continuity of oversight and strategic alignment.

• Regulatory Ambiguity: Can institutional investors like NSSF even hold ownership in a trust structure? Pension funds are typically restricted from investing in unregulated vehicles. This raises real questions about whether Uganda’s largest institutional investor can maintain its exposure to the MoMo business under the new framework.

In effect, shareholders are being asked to trade direct ownership of a high-growth public asset for a beneficial interest in a private one, held on trust until such time as the new company lists. Even with mechanisms like the “dividend adjustment trust” to make up for tax disadvantages, the structure still introduces governance and liquidity risks that public market investors do not typically sign up for.

To be fair, MTN’s motivations are not malicious. The company is executing on its “Ambition 2025” strategy, which aims to unlock platform value and attract fintech-focused partners. A standalone MTN New FinCo could, in theory, bring in strategic investors, leverage fintech expertise, and scale faster.

But this could have been done without eroding the public character of MoMo. A listing by introduction—using the existing MTN MoMo structure—would have retained all the benefits of transparency, liquidity, and investor protections, while still allowing the business to attract capital and partnerships.

Instead, what we have is a carefully engineered workaround that takes a key public asset and places it into a private holding structure, promising to “make things right” in a few years. For long-term investors—especially those who prize corporate governance and transparency—this trade-off deserves scrutiny.

That’s not to say there’s no opportunity here. 

But to fully capitalise on this opportunity, investors must go in with eyes wide open. They must advocate for stronger governance of the trust, demand clear disclosure commitments, and seek legal clarity on how their rights will be protected in the interim period.

Uganda’s capital markets need success stories, yes. But they also need discipline, transparency, and trust—not just in the financial sense, but in the institutional one.

MTN’s fintech spin-off could still be that story. But only if the complexity doesn’t obscure the core principle: that public wealth should not be privatized by proxy.

SURPRISE! SUPRISE! UGANDA ECONOMY IS GROWING

The last four decades have been the longest streak of economic growth in the history of Uganda. And in the state of the nation address on Thursday President Yoweri Museveni reported that the poverty levels have continued to reduce and the wealth disparities in the economy continue to narrow.

Quoting the most recent National Household Survey Report by Uganda bureau of statistics (UBOS) Museveni said the national poverty line – people living on a dollar a day, had fallen to 16 percent of the population from 20 percent four years ago.

He also reported an improvement in the country’s gini coefficient, which measures the extent of income inequality is down three percentage points to 38 percent from 41 percent in 2020.

The reduction in poverty levels and income inequality are important, because what else is economic growth for than an improvement in the overall welfare of the people, so improvements in this last measures are always welcome.

The Uganda economy grows even in our sleep. The GDP is now at about $60b compared to $4b at the beginning of the NRM adventure in 1986. According to the World Bank the Uganda economy was just under $10b in 20 years ago in 2005 and about $32b a decade ago.

A lot the early economic growth until about 2000 came from reconstruction and rehabilitation before we started adding new capacity.

By ensuring security, adopting a market economy and investing heavily in infrastructure – some estimates put this at, at least a billion dollars annually since 2012, the government has unlocked private sector initiative, unleashed new production and improved access to markets. This has made continued economic growth a mathematical certainty.

The challenge with the market is that it tends to concentrate wealth in a few hands, it is up to government to redistribute this wealth through taxation and not by handouts, to improve the capacity of more and more people to benefit from the macroeconomic growth.

The story is told of how former Tanzanian President Julius Nyerere was trying to convince his Kenyan counterpart Jomo Kenyatta to adopt socialism to which Kenyatta replied, “So you want to distribute poverty?”   

It is not a chicken and egg question. It is clear that to uplift the general lot of the people the economy has to grow first.

That being said its plain for all to see that government needs to do more. It finds itself in the unenviable position of the cook serving Oliver Twist, who wants more.

What is true however is that the trajectory is onward and upward, however much we who are living through it, may think progress is moving too slowly for our liking.

In his speech Museveni outlined 10 things his government will continue to do to ensure continued economic growth and more equitable distribution of these gains to everybody.

At the top of the list was ensuring continued peace and security, accelerating industrialization, encouraging industrialization and increasing market access regionally and internationally.

He also added skilling of youth, improved revenue collection, restructuring government to rationalize spending and the continued drive to move the rural economy away from subsistence to commercial production.

I was sad that fighting corruption came a lowly ninth and the repayment of domestic arrears was not touched on or at least was not deemed important enough to get specific mention.

While in a cynical way, corruption has helped keep the urban elite onside politically over the 40 years, it has slowed the improvement in the general wellbeing of the people by affecting service delivery. Government projects are either slowly, badly or not executed, in the process lining the pockets of the connected and denying the everyday man the chance to advance his lot.

Going by the improvement in the poverty numbers, it is clear that we are all rising with the tide of general economic growth, it is no time to seat on our laurels.

Two weeks ago I had chance to be in the Nakivubo area. Whereas the common narrative in bars and in our various meeting areas is that the economy is not doing well, I witnessed no sign of despondency and hopelessness. Downturn is a heaving mass of activity, which told me that while things are tough the general population can see light at the end of the tunnel, otherwise how do you explain that thriving activity, unprompted by whips and threats?

 

UGANDA’S LOOMING DIGITAL DEBT TRAP

Digital lending in Uganda—fast, frictionless, and seemingly harmless, has become as easy as sending airtime.

But behind the sleek USSD codes and app interfaces lies a new kind of financial pressure cooker: one where convenience masks crippling interest rates, and the cost of borrowing can quietly spiral out of control.

According to a 2023 report released last year by the Uganda Bankers’ Association and Asigma Capital—Digital Lending in Uganda: Series 1 – Unravelling the Demand Side—the demand for digital loans is exploding, especially among youth and informal workers. These loans, offered via mobile apps and codes, promise speed. But the trade-off is steep. Most digital lenders—licensed under the Tier IV Microfinance and Moneylenders Act—charge between 5% and 10% interest per month, with some even higher. That dwarfs the typical 2% monthly rate from traditional bank loans.

The UBA-Asigma report found that most digital borrowers don’t fully understand what they’re signing up for. The repayment terms aren’t always clearly spelled out, and hidden charges lurk behind every screen. For students, market vendors, and gig workers with irregular income, it often feels like they’re borrowing from a system designed for them to fail. And yet, because banks remain inaccessible—slow, rigid, full of forms—they keep coming back. Because when the landlord is calling and the fridge is empty, a fast loan now outweighs any regrets later.

The irony is that digital lending is meant to solve exclusion. But when borrowers are hit with sky-high charges and poor transparency, it becomes a new kind of exclusion—one where access doesn’t equal fairness. The sector is growing, but so is the risk of widespread over-indebtedness, especially in a population where financial literacy remains low.

Kenya’s experience should serve as a lesson. As the birthplace of M-Pesa and a pioneer of mobile money-driven credit, Kenya has seen an explosion in digital lending services over the past decade. At one point, over 120 lending apps were operating in the country, many of them unregulated. The result? Millions of Kenyans blacklisted on credit reference bureaus for defaulting on small digital loans—some as little as KSh 200.

The outcry forced the Kenyan government to step in. In 2021, the Central Bank of Kenya amended its laws to bring digital lenders under its supervision, mandating licensing, consumer protection rules, and interest rate transparency. Kenya’s experience is a cautionary tale: digital credit without strong guardrails can wreak more financial havoc than it prevents.

Meanwhile, traditional banks in Uganda are watching the fintech storm from across their mahogany desks. According to J. Samuel Richards’ Uganda Banking Sector Performance 2024, the sector has grown steadily, reaching UGX 54 trillion in total assets. But the top five banks control more than 55% of those assets and over 66% of profits. It’s a club with few members and a high barrier to entry. What’s more, 11 banks have non-performing loans that exceed 10% of their equity, a sign that not everything is as solid as it seems behind the polished branch counters.

If traditional banks are feeling cornered, it’s because they are. Not just by fintech lenders, but by telecoms—especially mobile money giants like MTN. MTN Mobile Money made UGX 250 billion in after-tax profits in 2024. That’s more than Absa Bank, with far fewer assets. With 13.8 million active users, mobile money has leapfrogged traditional banking, becoming the default financial tool for millions of Ugandans.

That shift is no longer theoretical. It’s real. The financial sector is finally starting to understand that access, not marble floors and leather chairs, is what really matters. The telecoms didn’t just offer products—they offered proximity...

In our rush to digitise credit, we’ve skipped a few crucial steps. Like making sure people understand what they’re borrowing. Like regulating lenders who operate in the digital shadows. Like ensuring that the promise of inclusion doesn’t become a trap wrapped in an app.

So what do we do?

Start with transparency. Borrowers should never have to guess how much they owe. Digital lenders must display interest rates, fees, and penalties in plain language—not buried in terms and conditions that nobody reads. Then there’s pricing. It’s time to move toward risk-based lending. If someone has a clean borrowing record, they deserve better rates. The data exists—use it to reward good behaviour, not punish it.

Financial literacy can’t be an afterthought either. Borrowing money should come with clear, digestible information—delivered in the same channels the loans are offered. If we can sell loans by SMS, we can educate by SMS too.

And regulators need to step up, fast. The Uganda Microfinance Regulatory Authority and Bank of Uganda must enforce rules that protect borrowers without stifling innovation. Sandboxes are one option—safe spaces for fintechs to test products under oversight. But more than tools, regulators need urgency. Because the digital debt clock is ticking.

Uganda is riding a digital finance wave that’s reshaping everything—from how we buy chapati to how we pay school fees. But if we don’t steer the ship, we may end up drifting into a financial storm. The revolution has arrived, but without fairness, transparency, and education, we risk replacing one set of barriers with another.

Yes, access matters. But access to a trap is not progress. Uganda’s digital lending boom must work for the many—not just the few who built the platforms. The money may come fast. But if we’re not careful, so will the regret.

UGANDA’S BANKING INDUSTRY: FAT PROFITS, THIN MARGINS AND A FORK IN THE ROAD

Uganda’s banks are in rude health—or so it seems at first glance.

According to a recent report by JSR Consulting, total commercial banking assets stood at UGX54 trillion at the close of 2024, having grown at an annual average of 11% since 2018. The numbers track closely with GDP growth over the same period, suggesting the sector has been floating comfortably on the tide of overall economic expansion. But scratch beneath the surface and the picture becomes more nuanced—part triumph, part trouble, and a whole lot of transformation on the horizon.

First, the good news. Profits are booming. The JSR report shows that net profits across the banking sector more than doubled between 2018 and 2024, rising from UGX751 billion to UGX1.63 trillion. Interest income, fees, commissions—all up. Bank shareholders have reason to smile.

But the spoils aren’t exactly evenly shared. As JSR points out, five banks—Stanbic, Centenary, Absa, Equity and DFCU—account for a staggering 66% of the industry’s profits and control 55% of total assets. Stanbic alone accounted for nearly 30% of profits. It’s clear: in Uganda’s banking sector, scale pays. The big are getting bigger. The rest are fighting for scraps.

That inequality extends to cost structures. JSR’s analysis reveals that the average cost-to-income ratio in the industry stands at 60%, with only a handful of institutions managing to keep it under 50%. Most

banks are groaning under the weight of high overheads—costs of legacy systems, bloated staffing, and real estate.

In an era when customers are increasingly digital-first, this reliance on brick-and-mortar infrastructure is quickly becoming an expensive burden.

Return on equity also tells the story of an uneven playing field. The larger banks—again, Stanbic, Centenary, Absa—enjoy ROEs north of 20%, while many smaller banks languish in single digits or worse. As the JSR report rightly notes, size matters.

It’s not just profitability and scale where disparities emerge. Asset quality is increasingly a concern. The JSR report highlights that the average non-performing loans to equity ratio is 11%, but individual bank figures range wildly—from 0% to a worrisome 51%. Even with high capital buffers, which the report confirms are well above the regulatory minimum of 12.5%, such levels of risk could eat into future profits if not managed carefully.

In the face of this uncertainty, banks have continued to flock to government securities. Loans and advances, which once made up 45% of bank assets, have now dropped to 41%, while investments in treasury instruments have risen to 28%. Government paper has been the safe harbour. But that harbour may no longer be as lucrative. JSR warns that as yields on government securities continue to slide, banks will have little choice but to pivot back to private sector lending.

That pivot, however, comes with its own challenges. Lending to the real economy—especially SMEs and the informal sector—is messy, costly, and risky. But it’s also where the growth is. To thrive, banks will need to invest in better risk models, credit analytics, and digital channels that can reach the customer segments traditionally left behind.

The JSR report is particularly clear-eyed about the biggest looming disruptor: fintech. Telecom-led financial services, mobile wallets, and agent banking have already eaten into the banks’ turf. Digital-first customers are increasingly bypassing traditional banks for faster, cheaper, and more convenient alternatives. JSR flags this as a key threat—and rightly so. The banks that still see fintech as a threat rather than a partner may not be around to learn the lesson a second time.

What’s more, the report foresees continued consolidation. With 25 licensed commercial banks, many of them small and inefficient, the logic for mergers and acquisitions is growing stronger. Regulatory pressure could accelerate the trend, especially if some institutions fail to keep up with capital or compliance requirements.

And then there’s inclusion. The JSR data shows that banks offering microfinance products—typically targeting the unbanked or underbanked—recorded significantly higher net interest margins, some as high as 35%. But these products are still a sideshow for many large banks. There’s a massive opportunity here: mobile-based lending, simplified KYC processes, and credit scoring based on alternative data could bring millions more into the financial fold.

So what lies ahead?

The report projects continued growth in banking assets, potentially crossing UGX100 trillion by 2030. But future success won’t be about balance sheet size alone. It will depend on a bank’s ability to adapt to a new model—leaner, digital-first, customer-centric. The winners will be those that embrace partnerships with fintechs, open banking frameworks, and embedded finance models. Even environmental, social, and governance (ESG) considerations will come to define lending policies and capital access.

Regulation, too, is expected to evolve. JSR anticipates tighter oversight on cybersecurity, digital transactions, and cross-border flows. Capital adequacy rules may become more stringent for systemically important banks. There is even scope for innovation-friendly policy to support green financing, sandbox experimentation, and broader digital integration.

Ultimately, Uganda’s banking sector is at a crossroads.

The model that delivered growth and stability over the past decade—one rooted in risk-free government lending, branch-led customer acquisition, and fee-based income—is fast becoming obsolete. The new model will demand technological agility, credit risk innovation, and meaningful financial inclusion.

The JSR report offers both a diagnosis and a roadmap. Whether banks heed its message could determine not just who wins in the market, but whether banking in Uganda remains relevant at all. Because in the financial game of the future, it’s not the biggest or oldest players that win—it’s the most adaptable.