Overview:
As of March 2025, commercial banks maintained a core capital adequacy ratio of 25.4 percent, credit institutions reported 26.7 percent, while microfinance deposit-taking institutions posted a significantly higher ratio of 43.4 percent.
Uganda’s banking sector is showing strong signs of resilience and growth, with commercial banks emerging as the main drivers of profitability in the financial system, according to the Bank of Uganda’s Financial Stability Review for the year ended March 2025.
The report reveals that commercial banks posted a robust Shs1.689 trillion in net profit after tax, a surge driven by increased lending, supported by a pick-up in economic activity. Credit institutions and microfinance deposit-taking institutions also reported improved earnings—Shs9.7 billion and Shs21.2 billion respectively—with the latter recording a sharp rise from just Shs1.7 billion a year earlier. The central bank noted that this sustained growth in profitability positions supervised financial institutions (SFIs) to diversify their product offerings, invest in technology upgrades, expand lending activities, and ultimately support broader economic growth.
The financial health of the sector is further demonstrated through strong capital adequacy ratios. As of March 2025, commercial banks maintained a core capital adequacy ratio of 25.4 percent, credit institutions reported 26.7 percent, while microfinance deposit-taking institutions posted a significantly higher ratio of 43.4 percent. All these levels exceed the minimum prudential requirements of 12.5 percent for banks and credit institutions and 15 percent for microfinance institutions. The central bank attributed this capital strength to increased profitability and the implementation of new, higher minimum capital requirements for supervised institutions.
Domestic Systemically Important Banks (DSIBs), designated by the Bank of Uganda for their significant size and influence on the sector, continued to demonstrate stability. These institutions—Stanbic Bank, Standard Chartered Bank, Centenary Bank, dfcu Bank, Absa Bank, and Equity Bank—accounted for 49.9 percent of total banking sector assets during the review period. The Bank of Uganda confirmed that all DSIBs remained adequately capitalized to absorb potential shocks and are subject to enhanced supervisory oversight under its risk-based supervision framework.
Meanwhile, the country’s payments and financial services ecosystem has undergone notable transformation, buoyed by increased digital adoption and regulatory interventions. Real-Time Gross Settlement (RTGS) activity saw considerable expansion, with transaction volumes rising by 22.3 percent and values by 21.6 percent in the year to March 2025. The Automated Clearing House (ACH) also recorded a 3.4 percent increase in Electronic Funds Transfer (EFT) values over the same period, despite a quarterly decline attributed to seasonal variations. Cheque usage continued to fall, accounting for only 7.1 percent of total transaction value, as electronic payment methods became more popular. The Bank of Uganda said this trend is consistent with its efforts to reduce interbank cheque transactions and promote digital payments.
Mobile money retained its lead as the dominant transaction platform, with active accounts rising sharply by 166 percent to reach 33.7 million. Transaction volumes and values also grew significantly by 20.9 percent and 25.5 percent respectively. Low-value transactions—those under Shs50,000—made up 92.2 percent of total mobile money activity, reflecting deepening financial inclusion across the country. Digital lending also recorded remarkable growth, with loan disbursements more than doubling to 102.4 million in volume and reaching a total value of Shs2.9 trillion. Agent banking networks expanded as well, with the number of agents increasing by 48.7 percent. However, the central bank noted a decline in the proportion of active agents, which it attributed to disputes over commission structures and operational challenges.
Despite the progress in digital finance, the Bank of Uganda warned that operational risks remain a concern, particularly those arising from cyber threats and system vulnerabilities. The central bank emphasized the need for stronger security measures and more resilient infrastructure to safeguard the growing digital financial ecosystem.
On liquidity and credit risks, the central bank reported a stable outlook, supported by pre-funded Real-Time Gross Settlement systems and fully backed electronic money. Finally, the review highlighted that the banking sector’s exposure to public debt remained within manageable levels. As of March 2025, this exposure stood at 30.4 percent of total banking assets, up slightly from 29.9 percent in December 2024. The Bank of Uganda said that supervised financial institutions remained well-capitalized and capable of continuing to support both private sector lending and public investment, with their exposure to government debt still within institutional limits and aligned with established risk management frameworks.