The financial sector is becoming increasingly diversified with non-bank financial institutions expanding their role in mobilising savings and extending credit, gradually reducing the dominance of commercial banks.
The 2024 Bank of Uganda Statistical Abstract report, released this month, indicates that whereas commercial banks still dominate, their share of credit and savings has been declining.
The report indicates that commercial banks, as of December 2024, controlled the largest portion of the financial system, accounting for about 78 percent of total financial sector assets.
However, this was a three-percentage-point decline from 2022, reflecting the steady rise of non-bank financial institutions such as microfinance institutions, credit institutions, Saccos, and pension funds.
Total banking sector assets stood at Shs60.8 trillion, from Shs54.4 trillion in 2023, while total deposits grew to Shs42.5 trillion, up from Shs38.2 trillion the previous year.
Despite the growth, the pace of asset expansion among non-bank institutions has been higher, pointing to a gradual rebalancing in the financial landscape.
Saccos and microfinance institutions are now a major source of credit for small and medium enterprises and rural households.
Collectively, they held assets worth Shs5.4 trillion in 2024, up from Shs4.1 trillion in 2023, representing a 31 percent annual increase, the fastest growth rate across the financial sector.
Their loan portfolios rose to Shs3.1 trillion, while customer deposits increased to Shs2.2 trillion, as more Ugandans turned to community-based savings groups and microfinance institutions for accessible lending and saving options.
On the other hand, credit institutions and microfinance deposit-taking institutions also registered steady growth, with combined assets rising to Shs4.8 trillion in 2024 from Shs4.3 trillion in 2023.
Deposits rose by 10 percent to Shs3.2 trillion, while lending to the private sector reached Shs2.6 trillion, a clear indicator that smaller institutions are capturing a larger portion of the business lending market, especially among small traders and farmers.
Their contribution to total sector credit now stands at approximately 9 percent, compared to 6 percent five years ago, highlighting their rising significance in Uganda’s credit market.
Impact of insurance and pension funds
Outside traditional banking and microfinance, insurance companies and pension funds have continued to strengthen their asset base.
The National Social Security Fund (NSSF) remains the single largest non-bank financial institution, with assets surpassing Shs26 trillion as of June 2025.
Private pension schemes, meanwhile, collectively managed Shs3.5 trillion, marking an annual growth of about 12 percent, while the insurance industry’s total assets reached Shs7.1 trillion, up from Shs6.4 trillion in 2023.
Combined, pension and insurance funds now account for over 23 percent of Uganda’s total financial assets, underscoring their increasing importance in long-term savings and investment.
Sector diversification
Overall, Uganda’s total financial system assets stood at Shs101.2 trillion as of December 2024, up from Shs91.5 trillion, of which non-bank financial institutions accounted for 22 percent, up from 18 percent in 2021.
The report highlights that this diversification is creating a broader, more inclusive financial ecosystem, capable of supporting both formal and informal economic activity.
However, the rapid growth of non-banking financial institutions also calls for stronger regulatory oversight, particularly for Saccos and microfinance institutions, to safeguard depositor funds and ensure prudent lending.
Uganda Microfinance Regulatory Authority and the Insurance Regulatory Authority have been tasked with expanding supervision frameworks to match the sector’s growth, while the Bank of Uganda continues to harmonise standards across financial intermediaries.
The details above indicate that Uganda’s financial system is steadily transitioning from a bank-dominated structure to a multi-tiered financial ecosystem, with non-bank financial institutions serving millions of low- and middle-income Ugandans.
The diversification has also competition, thereby building a more inclusive, competitive, and resilient financial sector.
However, sustaining this growth, Bank of Uganda indicates, will depend on continued regulatory reforms, improved governance, and the digital transformation of smaller financial institutions.
70 % of bank transactions now happening outside branches
Meanwhile, agent banking is fast overtaking traditional banking halls as the preferred channel for financial transactions, according to the Bank of Uganda Integrated Annual Report 2025.
The report, which highlights the performance of different sectors of the financial markets, shows that the value of transactions conducted through Agent Banking rose by 76.1 percent in the year to June, rising from Shs16.7 trillion in June 2024 to Shs29.4 trillion.
Transactions increased by 50.5 percent, from 8.3 million to 12.5 million, while the average transaction value grew from Shs2m to Shs2.35m.
The surge has positioned agent banking as the fastest-growing access channel in the formal financial system, handling nearly half the value processed through banking halls.
Agent Banking is a shared network connecting 24 financial institutions, 23 commercial banks, and one microfinance deposit-taking institution.
The network’s expansion has been remarkable, with the number of registered agents rising by 49.1 percent, from 15,288 in June 2024 to 22,793.
While agent banking transactions soared by more than three-quarters in value, branch-based transactions grew by less than 10 percent over the same period. The contrast underscores how quickly customer behaviour is shifting away from physical banking halls to agent-assisted and digital services.
The Shs29.4 trillion processed through agents represents close to half the total transaction value handled by banking halls, a striking achievement considering the channel is less than a decade old.
Banks have increasingly scaled down costly brick-and-mortar expansion in favour of shared agent networks, which provide services closer to customers, particularly in rural and peri-urban areas.
Agent banking’s rise reflects a wider trend across the sector, with customers moving toward low-cost, technology-enabled channels for cash deposits, withdrawals, bill payments, and account transfers.
The average transaction value of Shs2.35m shows that agents are no longer serving only low-income clients but are now facilitating higher-value transactions for traders, SMEs, and salaried workers.
By contrast, banking halls are gradually evolving into service centres for advisory, business banking, and corporate transactions rather than day-to-day retail operations.
Industry data shows that more than 70 percent of all cash-based customer transactions in 2025 occurred outside traditional branches, either through agents, mobile platforms, or ATMs.