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In mid-December 2025, the Bank of Uganda and the ministry of Finance launched “Project Okusevinga,” aimed at providing government bonds to ordinary Ugandans in a cost-effective way.
Currently in its pilot phase, the project operates as a money market unit trust fund, that in the minds of its proprietors at BoU, will facilitate access to government bonds cost effectively through electronic payments like mobile money.
While the project’s goal is to make the bond market accessible to ordinary individuals, its proprietors greatly misunderstand all that is wrong in this government bond market. The greatest weakness with individuals in Uganda’s financial sector is they are locked in some kind of ‘echo chamber’ of likeminded people hostile to alternative views.
Even the few on the reform front, just yearn for quick wins and fixes. What the bond market truly needs is a complete overhaul and a reimagining of the financial structure of the Treasury Market.
We need to focus on the fundamentals of the market plumbing not a government money market unit trust and innovations like Sukuk issuances; we require a well-developed market that can support value-added roles such as market making, underwriting, research and analysis, sales and trading, and risk management, among others.
This can be achieved by a highly scalable tech startup willing to invest and develop some sort of Electronic Communication Network (ECN) to facilitate liquidity for small retail traders, away from commercial banks.
This would enable all-to-all trading in the secondary market, moving toward direct order matching. Okusevinga will not achieve this. Contrary to what the financial sector echo chamber believes, the Bank of Uganda does not legally have a monopoly over our Treasury market’s plumbing.
In fact, BoU’s Request For Quote (RFQ) system serves as a disincentive for small retail investors. Currently, the central bank functions as a fiscal agent, issuing bonds on behalf of the Debt Management Office, which is a part of the ministry of Finance, Planning and Economic Development.
However, we need to rethink this Fiscal Agency agreement between the ministry of finance and the Central Bank to enhance the effectiveness of the market and avoid distractions. Creating a money market fund will do nothing to remedy the underlying plumbing of the treasury market, which is deeply flawed and out dated.
Certain promotional material on Okusevinga states that investing in Okusevinga via mobile money means you will receive government bonds. This is conceptually and practically false.
Project Okusevinga is actually a Unit Trust fund. Investing in a unit trust does not mean you own the underlying government bonds. When you invest in a unit trust, you receive shares or a portion of an investment fund that reflects the performance of the underlying government bonds, based on the investment strategies of the fund manager.
Essentially, you are investing in the fund manager’s strategy, which is why they charge a 2 per cent management fee. The government bond market is facing significant information asymmetry, making it challenging for ordinary investors to make informed decisions.
Recently, only eight banks have obtained dealer licenses, following my 2024 article on the topic. If the intent of Project Okusevinga is to encourage retail investors to drive down the prices and rates of these instruments, then this approach is misguided.
In our bond market, both the issuer and the central bank, acting as its agent, do not do much to support other market participants. The central bank seems to believe it is the sole authority in determining the pricing of these instruments.
Take, for example, the pricing of the newly issued 25-year bond. The primary market pricing for this bond has been self-corrected by the actual price in the secondary market. Anyone attempting to sell this 25-year government bond in the secondary market should be prepared to incur significant losses.
It would be wiser to hold onto it and simply collect your coupon payments every six months. This shows just how imbalanced the pricing of government bonds is, and Project Okusevinga will only add to these inefficiencies for its investors.
‘Project Okusevinga’ will not only face challenges in the long run, but it will also disrupt the unit trust and bond market ecosystem. The plumbing of our capital markets will suffer as a result.
Banks were the first to attack the unit trusts by launching their own products after realizing that unit trusts were eroding bank deposits. Now, the central bank is looking to eliminate them altogether with Okusevinga.
The writer is a lawyer
194louis@gmail.com
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