This is good news but finance minister Matia Kasaija wants more Ugandans to save
| THE INDEPENDENT | There is good news from the Capital Markets Authority (CMA) of a big milestone amounting to slightly over Shs1.1trillion attained as Assets Under Management by licensed Collective Investment Scheme (CIS) managers, representing savings mobilized from Ugandans.
This is a major achievement in Uganda’s march towards financial inclusion and savings mobilization that has been attained three years ahead of schedule according to the CMA’s four-year Strategic Development Plan (2021/22 – 2024/25).
CMA’s data indicates that licensed CIS Managers who include; UAP-Old Mutual Financial Services Limited, ICEA Lion Asset Management Limited, Britam Asset Managers Uganda Limited, Xeno Technologies Uganda Limited, and Sanlam Investments East Africa Limited had a total of slightly over Shs 1.1tn in AUM at the end of March 2022.
This represents a growth of 17.4% from Shs977.6 billion at the end of December 2021.
At the same time, the total number of Ugandans with CIS accounts at the end of March 2022 was 32,998 investor accounts, compared to 26,936 investor accounts in the same
period. This growth in AUM and clients can be attributed to increased awareness about the benefits of investing through CIS vehicles among Ugandans, CMA executives say.
This reported growth is mostly attributed to increased awareness of the CIS product and its advantages such as risk diversification; professional management; access to a wide variety of securities investments; affordability; tax benefit; liquidity; and the compounding benefit.
Experts in this field say, if an investor does not withdraw the interest (profit earned) on the investment in a unit trust, compounding leads to interest on both the money saved and interest earned. The benefit, experts say, is greater for someone who consistently makes regular contributions to the investment.
Commenting on the CIS milestone, Matia Kasaija, the Minister of Finance, Planning and Economic Development said, “Allow me to commend the 32,998 Ugandans who have already decided to save through CIS by opening accounts with the five licensed CIS managers, an improvement of 22.5% from 26,936 in a space of three months; however, we can do a lot better.”
Kasaija added, “Once more, I would like to congratulate the stakeholders in Uganda’s Capital Markets and the investing public on attaining an important milestone within the National
Development Plan III, three years ahead of schedule. The Government of Uganda is keen on encouraging more Ugandans to save. Deferring consumption today, developing a savings culture is critical in securing your financial future.”
The minister encouraged commercial bank account holders to consider also having an investment account alongside their bank accounts, to benefit from the services of professionals that are licensed by the CMA to grow their savings.
Keith Kalyegira, the Chief Executive Officer of the Capital Markets Authority said, Gross Domestic Savings (GDS) have grown by 6.52% year on year from Shs20.5trillion in 2016 to Shs26.4 trillion in 2020. As savings improve, Kalyegira said, the focus of Ugandans should now turn to avenues such as Collective Investment Schemes through which these savings can earn a high return while keeping risk as low as possible.
He said, their wish is to see more Ugandans choose CIS as their investment vehicles of choice regardless of the size of their savings. The interest earned per scheme type averages at an estimated 10% or more on an annualized basis, which is attractive in preserving the wealth of Ugandans against inflation.
Collective Investment Schemes offer a way to earn interest through passive investments in Government of Uganda Treasury Bonds and Bills, Fixed Deposits, Call Deposits, Commercial Paper, Corporate Bonds, Company stocks and other financial instruments in East Africa.
CMA says, investment schemes ensure that Ugandans enjoy the benefits of having their savings managed by professionals. There are also the benefits of risk diversification, lower transaction costs, and access to a wide variety of securities investments with a small sum of at least Shs100,000.
“With a CIS, your securities can be sold when you deem it necessary, such as to pay school fees, in total or in part at any time,” Kalyegira said.
According to CMA, most Ugandans saving through CIS invest in Umbrella funds, which have Shs793bn in Ugandan savings or 69.2% of all CIS money. Umbrella funds comprise of investments in a mix of short term and long-term securities.
The next popular is the Money Market Fund with Shs314.9bn or 27.1%. Money Market funds comprise of investments in short term securities for a period of less than one year such as treasury bills.
The third most popular is the balanced fund or hybrid fund with Shs37.99bn or 3.32%. This comprises of investments in bonds and stocks.
CMA executives say, the interest earned per scheme type averages at an estimated 10% or more on an annualized basis, which is attractive in preserving the wealth of Ugandans against inflation. This interest earned is several times greater than the 2% or 3% paid by banks for savings account deposits.