Low retail volumes in Uganda’s capital markets

How Shifting away from a traditional retirement plan to a 401k style plan might help.

Thing is, our local capital markets are non-existent to the average Ugandan Joe. He is more worried about the next meal than saving for retirement, which honestly makes a lot of sense considering how generally screwed He is, that is, from the "being a Ugandan" standpoint, but that's a whole conversation for another day.

A 401k plan is a retirement saving and investment plan offered by employers to their employees, where the employees choose the proportion of the salary they want to save and the types of investments they would like to invest in (from a list of available offerings)
Whereas a traditional retirement plan like NSSF, the saver has no choice on what type of investments their money is going into, and up until recently, there was no voluntary savings option with the mandate being, to contribute only 15% to the fund ( 5% from the employee,10% from the employer).

This inflexibility on both the investment side and the proportion-to-save side has fueled the self-perpetuating mass ignorance that clouds Uganda's capital markets.

Capital markets are financial markets that bring buyers and sellers together to trade stocks, bonds, currencies, and other financial assets. Capital markets include the stock market and the bond market. They help people with ideas become entrepreneurs and help small businesses grow into big companies.

It's not all dark and gloomy though as the recently passed NSSF bill takes strides towards eradicating the monopolistic leanings that have previously plagued the Uganda Pensions industry but, more could be done if we are to bolster or prop the trade volumes in our local capital markets.

Contributing Information to the Good Fight (CIGF) recommends that;

The government and the employers redesign their employee retirement plans to accommodate choice in how much to save and in what investment vehicles to put those savings, this will (in the very least) get the Ugandans in formal employment more interested in our stock market and bond market as they will want to know how best they can optimally invest money for their future selves. This choice in investments essentially places the “maximizing of market returns” ball in the hands of the savers.

The Capital markets Authority (CMA) in partnership with The Uganda Retirement Benefits Authority (URBRA), implements a sandbox where disruptive innovative retirement plan ideas are harbored and developed.

Ruhunda Pius

Researcher at CIGF