Uganda CMA Pushes Corporate Bond Market Revival

That shift matters economically because Uganda’s borrowing system remains heavily skewed toward the state. In the year ended June 30, 2025, 68.7% of collective investment scheme assets were in government bonds and 9.3% in Treasury bills, while corporate bonds accounted for just 0.2%. Fund managers were even more concentrated, with 80% in government bonds and only 0.2% in corporate paper. The five-year trend is still moving the wrong way: corporate bond allocations fell from 1.4% in 2020/21 to 0.2% last year.

For issuers, that leaves a thin market and a higher hurdle rate. When Treasury yields are elevated, companies must offer more to compete with the sovereign, but without the same perceived safety or liquidity. The regulator said the high-interest-rate environment has made corporate bonds less attractive to both issuers and investors because corporations face higher borrowing costs while investors can earn strong, relatively risk-free returns from government debt.

For investors, the problem is not just yield. It is also pricing and disclosure. Uganda’s corporate bond market has seen only nine issuers since launch in 1998, and no activity at all in either the primary or secondary market in the financial year ended June 30, 2025. Kakira Sugar’s Ush76 billion bond in 2013 remains the last corporate debt sale. In practice, that means little benchmark pricing, little secondary-market turnover and limited confidence that investors can exit positions quickly if sentiment changes.

The CMA is betting that credit ratings can help solve part of that problem by forcing issuers into more transparent financial reporting and giving institutional investors a clearer risk measure. Sinking funds, which require periodic cash set-asides for repayment, and guarantees, which provide additional protection at maturity, are meant to address the market’s central concern: whether corporate borrowers will repay on time and in full.

The broader policy goal is to diversify funding for Uganda’s development plan and reduce overreliance on banks and the sovereign balance sheet. The regulator is also lobbying for a more favourable tax regime and trying to bring state-owned enterprises to market, hoping infrastructure-related issuance can create a template for private companies.

The challenge is that government borrowing is crowding everything else out. Secondary-market turnover in Treasury bonds has surged from Ush3.5 trillion in 2015/16 to Ush73.8 trillion in 2024/25, underscoring how much depth has accumulated in sovereign debt even as corporate issuance stagnated. Unless yields fall or structural protections convince investors to take more credit risk, Uganda’s corporate market is likely to remain a niche rather than a financing engine.

For investors, the key question is whether the regulator’s efforts can turn a market defined by absence into one with enough liquidity, transparency and legal safeguards to price risk properly. If they cannot, government debt will continue to dominate portfolios, and private issuers will keep paying up for capital — or stay out of the bond market altogether.