In an effort to guide its customers through the technicalities of other investment options, PostBank Uganda shared tips on how individuals can explore PostBank’s different investment options and benefit from government securities and how these operate.
Head Financial Markets highlighted the different investment products a customer can utilize at the bank and these include: fixed deposits, call deposits, flexi fixed deposits, and the savings on the bank’s WENDI mobile app that gives the customer an interest rate of 10% per annum on a daily basis.
Under government securities classified as treasury bills or treasury bonds, the public or individuals can lend to the government, or the government can borrow from the public or an individual by issuing government paper (treasury bills or treasury bonds).
Treasury bills are instruments or government papers with a maturity period maximum of one year. They have 182 days, which is close to six months, and then 91 days, which is relatively three months and 364 days. Treasury bonds on the other hand have a maturity of more than one year, these are in the form of two years, three years, five-year, there’s a 10-year, a 15 year, and currently, they have been maximized at 20 years. These forms of securities are issued by the government agent, which we know is the Bank of Uganda.
Head of Financial Markets at PostBank Uganda, Iga Huzairu, explained that Treasury Bonds and Bills can be found in two markets which are termed primary markets, where the government has a defined auction calendar to enable one to know when a treasury bill, a treasury bond is going to be auctioned. Another instance is when the government comes in with private auctions, but ideally, they issue a calendar. You will know when to buy a given security at a primary market.
Iga added “A secondary market is available every day at any point in time. One can buy these securities from any commercial bank at any point in time. For these securities, the minimum amount you can invest is Ushs. 100,000 and above. So, anyone can invest in these securities as long as you have 100,000 Ugandan shillings and above. In terms of interest rates, these securities have different interest rates given the period and also the market condition as and when these auctions are issued. So, a person, an individual, a company, a government agency, a resident, can invest in these securities”. He encouraged customers to use the bank’s savings options highlighted above, and also diversify to treasury bills and bonds.
Alex Kakande, a Financial and Investment Analyst mentioned that there are numbers which we are so sure of, that they say 80% of earning Ugandans, those who either earn a salary, whether informally or formally, on average they earn around a million net per month. That means this person is earning around 12 million in a year. When you think about their aspirations and their dreams, whatever money they are making, they must at least save something. A typical Ugandan who is saving Ushs. 300,000, and the kind of land they can acquire, is either in the village or far away from town. It’s so small. It averages 6%, 7%. Our real estate is for different land structures.
“Instead of someone going and buying a 50 by 100 in Maya, a satellite city at Ushs. 7 million that they bought in 2021 at Ushs. 6.5 million, right now it’s Ushs. 7 million, It has only added just 500,000, if that money had been put in treasuring it would be 13.5%, 14%, which is much better off. So, when it comes to comparing these products, for an average Ugandan, you are going to make better money decisions over a long period by investing in treasury bonds as compared to investing in real estate.”
“That’s not to say someone shouldn’t come back to real estate. As your average wealth grows, if you are investing Ushs. 4.5 million per year in 10 years, you are looking at 100, if at that point, Ushs. 50 million, at that point, you can easily afford Gayaza. But at the point when you could afford just Ushs. 300,000, in those are 34%, yet a treasury bond is 13%”, Kakande concluded.
According to the 2023 FinScope Survey Report, both formal and informal savings range from 54 percent in 2018 to about 60% of Ugandans which represents a 6% increase.
Though this is good progress, there is still a need to not only drive financial literacy engagements to point out the importance of financial independence but there is a need to continue to encourage individuals to diversify their investment options once they save their money which will boost personal income and enable them to improve their livelihoods.
