The document discusses the structure of financial markets in Uganda. It describes the various players in the Ugandan financial system, including the government, central bank, retail banks, non-bank financial institutions, investment banks, and more. It also outlines different types of financial markets, such as money markets (for short-term debt), capital markets (for long-term debt and equity), primary markets (for new issues), and secondary markets (for resale of existing securities). The markets can be organized as exchanges or over-the-counter.

1. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
Introduction to Financial Services1

2. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
Types of Financial Institutions and their Respective Roles
Uganda Retail Banks
The Structure of Financial Markets
The Credit Reference Bureau
Trends in Financial Services Industry
Personal Financial Services
MODULE COVERAGE
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3. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
The structure of Financial Markets
In this unit we will look at the structure of
financial markets. You will get to learn about the
different players in the financial markets. Simply
put, financial markets are markets in which funds
are transferred from people who have an excess
of funds to those who have a shortage. The
efficiency of such markets determines to a very
large extent the wealth of the nation.
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4. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
The structure of the financial system
Player
1.Government
2.Central Bank
3.Other
financial
sector
regulators
Main Role
• Overall oversight of the financial sector, issuance
and oversight of fiscal policy and other related
policies
• Monetary policy implementation, regulating and
supervising banks and other deposit taking
institutions, banker to government and commercial
banks, policy advisor to government
• Issuing currency for use in the economy
• Regulating their respective financial service
providers (like insurance, capital markets, other)
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5. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
The structure of the financial system
Player
4.Retail Banks
5.Non bank
Financial inst
6. Investment
Banks
7.Merchant banks
8. Dev. Banks
9. The accounting
profession
Main Role
• Offering a full range of banking services to the public
• Offering authorized deposit and loan services to the
public
• Advice to clients on investing; investing funds on
behalf of clients, investing funds of their own in the
money and capital markets
• Financing trade and business transactions, offering
relevant advice and (more recently) some
investment banking activities
• Long term funding (loans and equity) to viable
businesses
• Oversight and regulation of the activities of
accountant and external auditors, to ensure that FIs,
like other businesses, produce reliable audited
financial reports
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6. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
The structure of the financial system
Player
10. Forex Bureau
11.Credit Reference
Bureau
12. Institutional
investors
13. Insurance
companies
14.Factoring and
Invoice
discounting
companies
15.Debt collectors
16. Rating
Companies/
Agencies
Main Role
• Buying and selling foreign currencies
• Keeping a comprehensive database of borrowers, from
which credit history of each person or organization
included therein can be compiled and communicated
• Long term investments by way of loans or equity, usually
in hard currencies
• Insuring businesses and persons against various risks
• Financing businesses by either collateralizing their invoices
for loans advanced to them or discounting such invoices
for cash
• Collection of debts on behalf of financial institutions and
other creditors as assigned
• Rating borrowers and other business organizations,
including financial institutions, for public or specific
consumption
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7. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
The structure of Financial Markets
Financial markets can be classified on the basis of
several parameters:
1. The nature of the financial securities traded
(primary versus secondary markets)
2. Forms of organization (organized exchanges versus
over-the counter markets)
3. Maturity of the financial instruments traded (capital
markets versus money markets)
4. Forms of trade intermediation (quote driven dealer
markets, order-driven markets and brokered
markets).
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8. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
Debt and Equity markets
• A company or government can obtain funds from the
financial system in two ways. The most common one is to
issue a debt instrument such as a bond.
• A bond is a contract by the borrower to pay the holder of
the instrument fixed shilling amounts periodically (interest)
and a final payment on maturity.
• The bond market is also where interest rates are
determined. This is the reason why bond markets and
interest rates are usually covered together. Bonds can be
used by the central bank to manage the supply of money in
the economy and to control interest rates.
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9. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
Primary and secondary markets
• A primary market is a market in which new issues of a
security such as a bond or stock are sold to the initial
buyers.
• A secondary market is where securities that have been
previously issued can be resold.
• The investment banks which we saw as part of the financial
system play the role of assisting in the sale of securities in
the primary market. This is because initial issues may not
be well known and the investment bank may guarantee
their price to the issuing company i.e. pays off the issuer at
a certain price, and does the selling to the public. This
process is known as underwriting.
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10. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
Exchanges and over the counter markets
• Secondary markets can be organized in two ways.
One is to organize exchanges where buyer and sellers
of securities meet to buy and sell the securities. The
Uganda securities exchange is such a market.
• The other method is to have an over the counter
(OTC) market in which dealers at different locations
who have securities stands ready to buy and sell
securities over the counter to anyone who goes to
them and is ready to pay their price.
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11. THE UGANDA INSTITUTE
OF BANKING &
FINANCIAL SERVICES
UIBFS
ISO 9001:2008 CERTIFIED
Money and capital markets.
• The money market is a financial market in which
only short term debt instruments (generally those
which mature within a year) are traded. Capital
markets is where securities with longer term
maturities are traded
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