East African Business Week

KAMPALA, UGANDA -  Non Bank Financial Institutions (NBFIs) have been given the opportunity to become Primary Dealers, an action sector players believe will strengthen the secondary market by providing liquidity.
If the proposed reforms are passed by the Financial Markets Development Plan (FMDP), NBFI like pension funds, Insurance companies, broker dealers will all be given an opportunity to act as Primary Dealers.
Primary dealer is a formal designation of a firm as a market maker of government securities. Currently all primary dealers operating in Uganda are Commercial Banks while in Kenya stock brokers were appointed as primary agents.
The Primary Dealers in Uganda are Stanbic Bank, Bank of Baroda, Standard Chartered Bank, DFCU, Barclays Bank and Centenary Bank.
The minimum total capital as defined by Bank of Uganda to the Primary Dealers is Ush12b ($5m) (risk based capital) and this according to some sector players this could pose a challenge to the NBFI if the capital requirement is not reviewed.
Mr. Stephen Kaboyo, the Director Financial markets department Bank of Uganda stressed the need for having NBFIs as they will encourage stability of prices of government securities by encouraging the narrowing of spreads between bid and offer.
He added that Bank of Uganda is in the process of installing an electronic trading platform to be delivered by November 2011, that will allow automation of all key processes and installation at primary dealer sites.
He said there will be introduction of non bank primary dealers that can meet the prescribed capital requirement. He added that the capital requirement proposals are under discussion.
The Bank of Uganda is also spearheading the creation of regional intermediaries that will support the  efficient trading of Government securities within the integrated financial market framework in the East African Community, Professor Emmanuel Tumusiime-Mutebile, Governor, and Bank of Uganda announced at the workshop.
"We have a need to promote the deepening and diversification of the financial markets. In addition, there is an active work programme within the EAC to promote the regional intergration of capital markets", he added.
Mr. Kabaki Wamweya, a Director at Dyer and Blair Investment bank, said that opening up the floor to allow NBFIs would create a platform where by different sector players will aggressively pursue clients, a case that is different from commercial banks that only wait for customers to come to them.