Uganda turns to Sandbox to fix Fintech ‘dead-end’ problem

KAMPALA — Uganda’s capital markets regulator is counting on a regulatory sandbox aimed at helping fintech firms move beyond grant-funded prototypes to commercially viable products, in a bid to address persistent innovation gaps in the sector.

The initiative launched by the Capital Markets Authority Uganda in October 2025 comes amid concerns that many fintech innovations in sub-Saharan Africa fail to transition from development to market deployment.

Ms Josephine Ossiya, chief executive officer of the authority, said too many startups stall after securing development funding.

“You get the development grants, but sometimes you stop at that place and do not commercialise that idea,” she said.

The sandbox, formally launched in October 2025, provides a controlled environment where fintech firms can test live products under regulatory supervision before rolling them out to the broader market.

Officials say the framework is designed to bridge a long-standing gap in financial regulation, where new products struggle to meet requirements designed for traditional financial services.

Under the arrangement, selected firms are allowed to operate within a limited scope while sharing data with the regulator, enabling both innovation and oversight.

Mr Dickson Sembuya, director of research and market development at the authority, said the sandbox will also help regulators assess whether new rules are necessary.

“We want to determine if at all you need to regulate,” he said.

The authority is currently reviewing four applications, reflecting key areas of opportunity within Uganda’s fintech ecosystem.

Two of the applications focus on fixed-income markets, particularly the trading of government securities, which has traditionally been dominated by banks and institutional investors.

One platform is targeting retail investors, seeking to widen access to Treasury bills and bonds, while another is exploring the use of blockchain technology to improve trade settlement among institutional players.

The blockchain-based proposal aims to enable faster transactions, improve transparency, and reduce counterparty risk. However, experts note that such systems require widespread adoption among market participants and may face integration challenges with existing banking infrastructure.

Another application under review focuses on crowdfunding, targeting small and medium enterprises (SMEs) that often struggle to access financing.

Industry analysts say crowdfunding platforms could help channel retail capital to underserved businesses, though they also raise concerns around investor protection, particularly for inexperienced participants.

The regulator is expected to assess safeguards such as disclosure requirements, investment limits, and platform accountability before granting approvals.

While regulatory sandboxes have gained traction across Africa, their effectiveness has been mixed. Some have been criticised for slow processes and limited outcomes, with few products progressing to full commercial launch.

Uganda’s sandbox is still in its early stages, but industry players say its success will depend on how quickly it moves firms from application to live testing, and eventually to market entry.

There are, however, favourable conditions that could support its success.

Uganda has one of the highest mobile money penetration rates in the region, providing a strong digital payments backbone that fintech firms can leverage.

In addition, the country’s government securities market is active, with growing interest in expanding participation among retail investors.

Regulators say the goal is to ensure that innovation translates into tangible financial products that can deepen Uganda’s capital markets and expand access to investment opportunities.

The coming months are expected to test whether the sandbox can deliver on that promise and help shift the sector from experimentation to sustainable growth.