Uganda’s Financial sector resilient as customer deposits hit Shs 38 trillion
The central bank notes the systemic risks have moderated further over the year to March 2025, despite an uncertain global economic outlook
KAMPALA, July 8, 2025 – – Uganda’s financial sector continues to display remarkable resilience and steady growth, supported by rising customer deposits, enhanced liquidity buffers, and robust profitability among supervised financial institutions [SFIs], according to the Bank of Uganda Quarterly Financial Stability Review for March 2025.
The central bank notes the systemic risks have moderated further over the year to March 2025, despite an uncertain global economic outlook. ‘‘This comes as the country benefits from accommodative monetary policy, low inflation and strong domestic growth, with gross domestic product [GDP] projected to grow between 6.0–6.5 percent in financial year 2024/25, potentially surpassing 7 percent in subsequent years.
“Domestically, growth remained strong, supported by low inflation and accommodative Bank of Uganda policies aimed at supporting stability across households, businesses, and financial institutions,” the report reads.
The financial sector’s total assets expanded significantly with customer deposits rising by 4 percent to Shs 38 trillion, reversing a decline in the previous quarter. Liquidity conditions improved as liquid assets grew by 1.1 percent to Shs 20.5 trillion, pushing the liquidity ratio to 51.8 percent, well above the regulatory minimum of 20 percent.
Foreign currency deposits grew by 6.6 percent, while Uganda shilling-denominated deposits increased by 2.7 percent, reflecting improved depositor confidence.
“Deposits remain the primary funding source for financial institutions, accounting for 83.4 percent of total liabilities,” BoU reported.
Meanwhile, loan disbursements increased by 6.8 percent year-on-year, reaching Shs 22.9 trillion, supported by reduced lending rates and improved borrower repayment behavior. Notably, digital credit saw a surge, with disbursements doubling to Shs 2.9 trillion, underscoring the sector’s digital transformation.
Asset quality also improved, with the non-performing loans [NPL] ratio easing to 4.2 percent, down from 4.6 percent a year earlier. Expected Credit Losses fell by 12.6 percent, and capitalized interest declined by 77.3 percent, signaling stronger repayment capacity.
Profitability surged across all SFIs. Net profit after tax rose by 13.8 percent to Shs 1.7 trillion, while the return on assets improved to 3.2 percent. MDIs and credit institutions also saw strong earnings growth, positioning them to expand product offerings and support inclusive growth.
“Profitability supported improved capital adequacy, with most SFIs holding sufficient buffers,” BoU stated, adding that the core capital adequacy ratio for commercial banks stood at 25.4 percent, well above the 12.5 percent minimum.
Despite the overall positive trajectory, Bank of Uganda [BoU] flagged persistent vulnerabilities, including sub-trend credit growth and operational constraints in a few SFIs. Additionally, global headwinds, particularly US trade tensions, rising protectionism, and geopolitical shocks pose downside risks to Uganda’s macro-financial stability.
“The global economic outlook has weakened mainly due to rising uncertainty from recent trade tensions… global growth is projected at 2.8 percent in 2025,” the report references the IMF’s April 2025 World Economic Outlook.
Nevertheless, BoU assured the public of proactive risk management: “The Bank of Uganda remains proactive and will continue to leverage both monetary and macroprudential tools to enhance the resilience of the financial system as risks evolve.”
The payments ecosystem has shown robust growth, driven by digital adoption. Active mobile money accounts surged by 166 percent to reach 33.7 million, while transaction values grew 25.5 percent year-on-year. Over 92 percent of mobile transactions were low-value [below Shs 50,000], indicating deepening financial inclusion.
Meanwhile, digital lending volumes doubled to over Shs 2.9 trillion and agent banking expanded by 48.7 percent, although the number of active agents dropped slightly due to commission-related disputes.
However, BoU projects continued financial stability in the near term. Stress tests indicate the sector is resilient to extreme but plausible shocks, supported by healthy liquidity coverage ratios [494 percent] and net stable funding ratios [176.8 percent] as of May 2025.
Two SFIs are still below the new paid-up capital requirements, but have made “significant progress” in line with restoration plans.
Despite moderate systemic risks and improving asset quality, the Bank of Uganda has flagged rising global protectionism, trade fragmentation and geopolitical tensions as emerging threats to financial stability.
“Heightened global protectionism and geopolitical tensions present risks to trade and inflation,” BOU warned in its March 2025 Financial Stability Review, referencing recent escalations in global tariff rates and sluggish global growth.
The report points to the IMF’s April 2025 World Economic Outlook, which revised global GDP projections to 2.8 percent in 2025, down from 3.3 percent earlier this year, due to newly imposed U.S. tariffs and retaliatory measures.
Meanwhile, BOU revealed digital lending has surged, with disbursements more than doubling to Shs 2.9 trillion, up from Shs 1.04 trillion in March 2024.
“This underscores the increasing importance of digital credit,” BOU noted, adding that the rise is contributing significantly to financial inclusion and credit access, particularly among low-income populations.
In terms of profitability, SFIs collectively posted a Shs 1.7 trillion net profit after tax, up by 13.8 percent from a year earlier. Return on assets improved to 3.2 percent, with major gains in operational efficiency and reduced provisioning for bad debts.
“The growth in profitability positions SFIs to further diversify their products, invest in technological upgrades, expand lending activities, and ultimately contribute to economic growth and financial stability,” the Central Bank said.
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