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First-ever dollar collective saving scheme launched in Uganda

Anglo-South African financial services company Old Mutual Investment Group has launched a maiden dollar unit trust fund in Uganda.

The dollar unit fund seeks to diversify and add to the quality of the investment opportunities on the market but will also help to guide clients to grow, leverage, protect, and transfer wealth, company officials announced at the launch.

Simon Mwebaze, the managing director at UAP Old Mutual Investment Group, said unit trusts have gained traction on the local market as a low-risk, cost-effective access to both fixed-income and stock markets investment options.

“Investors are to diversify their risk and gain access to investments they might not have been able to access independently. The introduction of the dollar unit fund is a move aimed at progressing us further down this road. There’s growing demand for diversified investment options hence the need to innovate accordingly,” he added during the launch held at Sheraton Hotel Kampala.

A unit trust is a collective investment scheme that pools contributions from investors who share a common investment objective. The pooled funds are strategically invested in a diversified portfolio of financial securities, including equities (shares), bonds, cash, bank deposits, and more.

Keith Kalyegira, the CEO of Uganda’s Capital Markets Authority, said investments in the country’s collective investment schemes have reached the Shs 2 trillion mark.

“We have witnessed significant growth in the unit trust space and the market assets under management currently stand at Shs 2 trillion, contributed to by 60,000 investors. With the launch of this new product, we expect numbers to shoot higher. This growth underscores the confidence of investors in unit trusts as a vehicle for prosperity and wealth creation,” Kalyegira said in a speech read by Denis Kizito, a supervision manager at CMA.

“The launch of the dollar unit trust is, therefore, a testament to the vibrancy and potential of Uganda’s capital markets.”

The official from the Capital Markets Authority said they have played a pivotal role in facilitating this growth by establishing a robust policy framework that governs the issuance and trading of securities in Uganda’s capital markets.

Figures published by Uganda’s Capital Markets Authority show average individual balances recorded among local unit trust funds, also referred to as collective investment schemes, stood at $8,010 by the close of June 2023.

The total number of client accounts increased from 56,787 in March 2023 to 66,188 by the end of June 2023, while the full value of assets held by Ugandan unit trust funds amounted to $530.2 million by the close of June 2023.

Though Uganda’s unit trust industry appears smaller than some of its regional peers in terms of assets, considerable investments made by local Saccos in unit trust funds are cited for the huge average client balances recorded in this segment.

The share of unit trust assets held by Saccos is currently estimated at more than 10 per cent to date, according to industry sources, a figure influenced by growing desires for bigger returns on members’ funds held by savings and credit organisations.

The average interest rate paid on unit trust savings lies in the range of 10-13 per cent per year while the 10-year weighted inflation rate — a core tool used in the calculation of returns on people’s savings — stands at 10 per cent, according to financial experts.

Mwebaze said around 10 per cent of unit trust clients in Uganda are institutional investors who generally account for 40 per cent of total industry assets today. Prof Samuel Sejjaaka, the board chairman of UAP Old Mutual, said the introduction of the Dollar Unit Trust Fund holds great promise since it will stimulate economic growth by attracting foreign investments, expanding the capital market, and boosting foreign exchange reserves.

“Uganda’s financial market will become more globally integrated, fostering international relationships and cross- border opportunities. This innovative move positions Old Mutual Investment Group as a leader in advancing our nation’s financial landscape,” he said.

He added that the dollar unit fund will diversify investment options hence attracting a broader clientele, enhancing the group’s reputation as an innovative institution.

“We’ll also develop specialized expertise in international markets. The fund’s introduction represents a pivotal moment in our journey, showcasing our commitment to excellence and growth,” he added.

On his part, Arthur Oginga, the group CEO, said the dollar unit fund will empower local investors by giving them access to a broader range of investment opportunities.

“This new investment option brings several benefits to our clients, including diversification, access to global markets, and the potential for higher returns. We are committed to helping our clients secure their financial future,” Mr. Odinga said on Tuesday.

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