Bank of Uganda Deputy Governor Louis Kasekende has predicted that the liberalisation of local pensions will propel the sector to new levels of growth.
Dr Kasekende believes private innovations of new savings products can help to deepen the financial services sector by bringing non-financial savings from the unregulated informal sector into the regulated formal sector.
"As we go for regional integration, we can also think of regionalisation of financial provision such that we can reach all retail investors," Kasekende said last week, during the launch of UAP Financial services Unit Trust Funds.
Kasekende, who represented Governor Emmanuel Tumusiime-Mutebile, also advised policymakers to develop a regional approach to financial challenges. Unit trust funds are a collective investment scheme, where investors pool contributions for a common investment objective - used to purchase portfolio of financial securities.
UAP, who got the licence for unit trust management services in July this year, have introduced three products: UAP Money Market Fund, Umbrella Trust Funds, and UAP Balanced Fund.
The UAP Uganda general manager, Patrick Ndonye, said the Money Market Fund would make it possible to invest in high-yielding short-term, interest-bearing securities, for instance bank deposits, treasury bills or commercial papers.
"The balanced fund will have a balanced portfolio, investing in both equities and fixed-income securities - both listed and unlisted shares, treasury bills and bonds with a bias on fixed income securities," Ndonye said.
The chairman of UAP financial services, Gordon Wavamunno, said the unit trust products would help to allow retail investors to access high-priced markets that they were previously limited to. These include government bonds and offshore investments.
The lump sum investments will require a minimum of Shs 3m while the regular investments will require an initial Shs 1m and monthly top-ups of Shs 100,000. Ndonye said there had been an increasing demand for investment avenues by Ugandans in the Diaspora. These send home an estimated Shs 2.2 trillion through informal channels.
"These funds will offer an avenue for the country to absorb the Diaspora remittances," said Ndonye.
At the same time, the group managing director, Dominic Kiarie, said they were going to extend their investment, especially into the pensions sector.
"We got approval from Uganda Retirement Benefits Regulatory Authority to provide funds management services to pension schemes," Kiarie said.
Standard Chartered bank shall be the custodian and trustee of the unit /trusts, with PricewaterhouseCoopers as the auditors. All these funds would attract a two per cent annual management fee and no initial fee except for the Balanced Fund, which is two per cent.
Until now, even with consistent diversification and development of financial services, the growth of the non-bank financial services sector in Uganda has remained slow.
In 2010, BoU estimated that non-banking institutions made up a mere three per cent of the financial sector in Uganda. The National Social Security Fund took the biggest share of this percentage. BoU wants this share to rise to between 20 per cent and 25 per cent within the next five years.