Primary health facilities in low- and lower-middle-income countries often struggle to receive operational funding reliably and on time. Direct Facility Financing (DFF) - where funds are channelled directly to facilities to cover part of their running costs - has gained growing attention as a practical alternative to more complex, donor-driven financing models.

Uganda is one of Africa's earliest and most fully developed examples of DFF, yet its experience has received remarkably little attention in the health financing literature. When Uganda abolished user fees in 2001, it needed a sustainable alternative to fund primary healthcare facilities. From 2007, it began channelling funds directly into facility bank accounts, embedding this system within its existing decentralisation and public financial management framework rather than creating parallel structures.

This paper traces how Uganda's DFF system evolved across three reform phases between 2007 and 2015, driven initially by the need to prevent funds being diverted before reaching frontline providers, and later incorporating equity, transparency and performance-linked mechanisms. It documents the financial management arrangements governing how facilities plan, receive and account for funds, and reflects on the structural challenges, including fragmented external financing, drug stockouts and transfer delays that have constrained the system's broader impact.

Uganda's experience offers evidence-based insights for governments and partners seeking to strengthen facility financing systems across low- and middle-income countries.

Report by the Overseas Development Institute