This paper provides an empirical analysis of the role
of public capital inflows in financial inclusion in Uganda. Financial inclusion
was measured using three dimensions (access, usage and quality). Whereas public
capital inflows where measured using three proxies of loans, grants and
donations. The study anchored on financial intermediation theory. The target population
was public organisations that have received public capital in Uganda. The study
used data collected from Bank of Uganda and Ugandan investment Authority, Ministry
of Finance for the period 2012-2016. A cross sectional descriptive designs were
used while data was analyzed using descriptive statistics and multivariate Logistics
regression analysis. It was found that public capital inflows did not play any role
in promoting financial inclusion in Uganda. From the findings the study
concluded that loans contributed 89% of public capital while grants contributed
11%. The study recommends that government particularly Bank of Uganda, Ministry
of Finance and Uganda Investment Authority to formulate policies to ensure
loans are reduced and parliament through its oversight role should ensure this
happens. Further, grants and donations which are sustainable and stable sources
of inflows should be deepened and widen by ensuring that adequate
accountabilities for grants are done.
Keywords: Public Capital, Financial Inclusion,
Aid International (2009). Annual Report. ActionAid International. The Hague,
G.A. (1970). The market for “lemons”: Quality uncertainty and the market mechanism,
Quarterly Journal of Economics 84, 488-500.
L., Areendam, C., Kalemli-Ozcan, S., Selin, S. (2003) “FDI and economic growth:
The role of local financial market” Journal of International Economics, 6(1),
D.P. (1979). The incentive problem and the design of investment banking
contracts, Journal of Banking and Finance 3, 157-175.
D.P. (1982). A model of the demand for investment banking advising and
distribution services for new issues, Journal of Finance 37, 955-976.
G.J., and Smith Jr., C.W. (1976). A transactions cost approach to the theory of
financial intermediation, Journal of Finance 31, 215-231.
A.N., and Udell, N.G. (2002). Small business credit availability and
relationship lending: the importance of organisational structure, Economic
Journal 112, F32-F53.
B.S. (1983). Nonmonetary effects of the financial crisis in the propagation of
the Great Depression, American Economic Review 73, 257-276
A.W.A., Greenbaum, S.I., and Thakor, A.V. (1993), Reputation and discretion in
financial contracting, American Economic Review 83, 1165-1183.
T.S., and Kracaw, W.A. (1980). Information production, market signaling, and
the theory of financial intermediation, Journal of Finance 35, 863-882.
Rodrik and Arvind Subramanian (2008). Why did financial globalization
D.W. (1984). Financial intermediation and delegated monitoring, Review of
Economic Studies 51, 393-414.
D.W., and Dybvig, P. (1983). Bank runs, deposit insurance, and liquidity,
Journal of Political Economy 91, 401-419.
D.W., and Rajan R.G. (2001). Liquidity risk, liquidity creation, and financial
fragility: A theory of banking, Journal of Political Economy 109, 287-327.
Anzoategul; Asil Demirguc-Kunt and Maria Soledad Martinez Peria (2011).
Remittances and Financial Inclusion: Evidence from El Salvador. International
Bank for reconstruction and Development/The world Bank. https://doi.org/10.1596/1813-9450-5839.
E.F. (1980). Banking in the theory of finance, Journal of Monetary Economics
S. (1983). A framework for monetary and banking analysis, Economic Journal 93,
D., and Hellwig, M. (1985). Incentive-compatible debt contracts: The one-period
problem, Review of Economic Studies 52, 647-663.
Ayana Aga and Maria Soledad Martinez Peria (2014). International remittances
and Financial Inclusion in Sub- Saharan Africa. Policy research working paper.
International Bank for reconstruction and Development/The world Bank.
Bettin; Alberta Zazzaro (2011). Remittances and Financial development:
Substitutes or Complements in Economic Growth? Bulletin of Economic Research.
Volume 64, issue 4. https://doi.org/10.1111/j.1467-8586.2011.00398.x.
C.A.E. (1987). Why do banks need a central bank?, Oxford Economic Papers 39,
J.G, E.S Shaw. (1960). Money in a theory of Finance, Brookings.
J.M., and Lindsay, R. (1968). The uniqueness of commercial banks, Journal of
Political Economy 71, 991-1014.
O. (1995). Firms, Contracts, and Financial Structure, Oxford: Clarendon Press.
O., and Moore, J. (1995). Debt and seniority: An analysis of the role of hard
claims in constraining management, American Economic Review 85, 567-585
O., and Moore, J. (1998). Default and renegotiation: A dynamic model of debts,
Quarterly Journal of Economics 113, 1-41.
M. (1991). Banking, financial intermediation and corporate finance, in: A.
Giovannini and C. Mayer (eds.), European Financial Integration, Cambridge:
Cambridge University Press.
B., and Tirole, J. (2001). LAPM: A liquidity-based asset pricing model, Journal
of Finance 56, 1837-1867.
J.H. (1986). Federal bank regulatory policy: A description and some
observations, Journal of Business 51, 3-48.
C.P. (1989). Manias, Panics, and Crashes – A History of Financial Crises,
Basingstoke and London: MacMillan (2nd ed.).
R.S., and Strahan, P.E. (2001), Bankers on the boards – monitoring, conflicts
of interest, and lender liability, Journal of Financial Economics 36, 225-258.
. La Porta,
R., Lopez-de-Silanes, F., Shleifer, A., and Vishny, R.W. (1998). Law and
finance, Journal of Political Economy 106, 1113-1155.
E., and Neuberger, D. (2001). Do lending relationships matter? Evidence from
bank survey data in Germany, Journal of Economic Behaviour and Organization 45,
H.E., and Pyle, D.H. (1977). Informational asymmetries, financial structure,
and financial intermediation, Journal of Finance 32, 371-387.
j. B & Massa, I, (2009). The global financial crisis and sub-Saharan
Africa. The effects of slowing private capital inflows on growth, ODI Working
Paper 304. London: Overseas Development Institute.
N.G. (1986). The allocation of credit and financial collapse, Quarterly Journal
of Economics 101, 455-470.
R.C. (1995b). Financial innovation and the management and regulation of
financial institutions, Journal of Banking and Finance 19, 461-481.
R.C., and Bodie, Z. (1993). Deposit insurance reform: a functional approach,
Carnegie-Rochester Conference Series on Public Policy 38, 1-34.
of Finance, Planning and Economic Development (2018). Report on public debt,
guarantees, other financial liabilities and grants for financial year 2017/18.
Bhinda Matthew Martin (2009). Private capital flows to low income countries:
Dealing with boom and bust. Debt Relief International Ltd. London EC1R 3AF
D.H. (1971). On the theory of financial intermediation, Journal of Finance 26,
J.E., and Weiss, A. (1981). Credit rationing in markets with imperfect
information, American Economic Review 71, 393-410.
J.E., and Weiss, A. (1983). Incentive effects of terminations: Applications to
the credit and labor markets, American Economic Review 73, 912-927.
Organisation for Economic Co-operation and Development (2002). Annual Report.
J. (1963). Commercial banks as creators of “money”, in: W.L. Smith, R.L. Teigen
(eds.), Readings in Money, National Income, and Stabilization Policy, Homewood,
Ill.: Richard D. Irwin.
R.E. (1974). Money creation and the theory of the banking firm, Journal of
Finance 29, 57-72.
Nations Conference on Trade and Development (2005). World Investment Report.
Transnational Corporations and the Internationalization of R&D. United
Nations New York and Geneva, 2005.