KAMPALA — Tier IV financial institutions have been urged to strengthen governance, internal systems and risk-management frameworks as they embrace digital transformation and respond to emerging risks in Uganda’s financial sector.
The call was made at the Founders, Directors and Board Members Conference, organised by the Association of Non-Deposit Taking Microfinance Institutions (ANDT) at MoTIV Creations in Bugolobi, Kampala.
Held under the theme “Built to Last: Governance, Leadership and Transformation for Sustainable Tier 4 Institutions,” the conference brought together founders, directors, board members, government officials, development partners and other financial-sector stakeholders to discuss governance, leadership, access to finance, digital transformation and institutional sustainability.
ANDT Chairman Raymond Kiwanuka said the gathering was intended to help build stronger institutions that serve communities responsibly, advance financial inclusion and contribute to Uganda’s economic development.
The Tier IV sector comprises Savings and Credit Cooperative Organisations (SACCOs), non-deposit-taking microfinance institutions, money lenders and Village Savings and Loan Associations (VSLAs), many of which provide financial services to communities, small businesses and individuals outside the traditional commercial banking system.
Speaking at the conference, Serena Cavicchi, Senior Social Development Specialist at the World Bank and Task Team Lead for the GROW Project in Uganda, highlighted interventions aimed at expanding opportunities for women entrepreneurs through access to finance, entrepreneurship support, training and apprenticeships.
Cavicchi highlighted the importance of combining access to capital with business skills and other support that enables women entrepreneurs to strengthen their enterprises. The GROW programme has also increasingly focused on measuring results beyond the number of loans issued, including business turnover, job creation, productivity, formalisation and resilience.
The Generating Growth Opportunities and Productivity for Women Enterprises (GROW Project) is implemented by the Government of Uganda through the Ministry of Gender, Labour and Social Development and the Private Sector Foundation Uganda (PSFU), with financing from the World Bank.
Participants were also urged to strengthen institutional planning by putting in place clear budgets, work plans and strategies, supported by appropriate systems and partnerships to enable their institutions to operate sustainably.
Hon. Shartsi Kutesa Musherure, Minister of State for Finance, Planning and Economic Development in charge of Microfinance, challenged Tier IV institutions to embrace digital transformation, strengthen governance and invest in their people to remain sustainable and serve customers more effectively.
Musherure said Tier IV institutions play a critical role in advancing financial inclusion by reaching people who may not be adequately served by commercial banks, including farmers, market vendors and small entrepreneurs who may lack conventional collateral.
She said the Government has established a regulatory framework through the Tier 4 Microfinance Institutions and Money Lenders Act aimed at strengthening institutional governance, protecting customers and supporting the sustainable development of the sector.
The Minister also called on boards and directors to understand their fiduciary responsibilities, maintain a clear separation between governance and management, ensure transparent financial reporting, manage risks prudently and remain accountable to members and customers.
“Where governance is weak, even the well-capitalized institution will crumble. Where governance is strong, even modest institutions can endure for generations,” Musherure said.
She called for stronger collaboration between government and the sector in capacity building and training for boards and management, alongside improved data and information sharing to support policy and evidence-based decision-making.
Musherure also linked the transformation of Tier IV institutions to the Government’s Tenfold Growth Strategy, highlighting the contribution stronger and more efficient financial institutions can make towards enterprise growth and Uganda’s wider economic transformation.
Compliance Must Become Part of Institutional Culture
Compliance was another major issue highlighted during the conference, with institutions urged to make it part of their organisational culture and strengthen internal controls that support accountability and sound decision-making.
Boards and management teams were encouraged to establish clear risk-management strategies to identify, assess and respond to operational, financial, regulatory and technological risks.
Institutions were also urged to strengthen governance structures that clearly define the responsibilities of boards and management and provide effective oversight of institutional operations.
The conference further highlighted the importance of institutions having the right systems, partnerships, work plans and budgets to support their strategies rather than allowing institutional growth to outpace their internal capacity.
Digital Transformation Brings Opportunities and New Risks
Digital transformation featured prominently at the conference, with institutions encouraged to adopt technology to improve efficiency, strengthen decision-making and deliver financial services more effectively.
Musherure said the microfinance sector is operating in an environment increasingly shaped by digital financial services, changing consumer expectations and emerging risks, including cyber threats.
She challenged institutions to invest in digital record-keeping, mobile money integration and professional development for staff and boards, while building cultures of continuous improvement.
“Transformation is not a threat – it is an opportunity to serve your members and customers better and more efficiently,” she said.
Adebowale Atobatele, Chief Executive Officer of Armada Credit Bureau urged participants to put in place cybersecurity measures and fraud-prevention systems capable of protecting both institutions and their customers as transactions and other financial services increasingly move onto digital platforms.
The conference also highlighted risks associated with digital lending, particularly around the collection, storage and use of customer information.
Institutions were encouraged to understand the risks accompanying digital transformation and strengthen safeguards around customer data as they expand digital lending and other technology-enabled financial services.
MFIs Encouraged to Strengthen ESG Reporting
The conference also called on Tier IV financial institutions to incorporate Environmental, Social and Governance (ESG) reporting into their institutional reporting systems.
Institutions were encouraged to strengthen how they capture and report the wider impact of their operations alongside financial performance.
For microfinance institutions serving women entrepreneurs, farmers, young people, small businesses and underserved communities, ESG reporting provides a framework for demonstrating how their activities contribute to enterprise development, livelihoods, employment and financial inclusion.
The discussions also highlighted the growing importance of responsible governance and the ability of institutions to demonstrate their social and environmental impact as they engage regulators, development partners, investors and the communities they serve.