{"id":42839,"date":"2018-01-09T18:56:42","date_gmt":"2018-01-09T23:56:42","guid":{"rendered":"https:\/\/staging21.finca.org\/uncategorized-en-ca\/how-uganda-plans-to-cut-financial-exclusion-to-5-percent-in-5-years"},"modified":"2024-11-04T02:07:32","modified_gmt":"2024-11-04T07:07:32","slug":"how-uganda-plans-to-cut-financial-exclusion-to-5-percent-in-5-years","status":"publish","type":"post","link":"https:\/\/finca.org\/en-ca\/how-uganda-plans-to-cut-financial-exclusion-to-5-percent-in-5-years","title":{"rendered":"How Uganda Plans to Cut Financial Exclusion to 5 Percent in 5 Years"},"content":{"rendered":"

In October 2017, Uganda launched a new five-year National Financial Inclusion Strategy<\/a>. The strategy seeks to reduce financial exclusion from 15 to 5 percent by 2022. How? By ensuring all Ugandans have access to and are able to use a range of quality and affordable financial services.<\/p>\n

Uganda has made progress in financial inclusion<\/a> as a result of financial sector reforms that began in the 1990\u2019s. These include interest rate liberation, reduction in directed credit, and legal and regulatory changes. Such reforms have improved people\u2019s access to financial services through banks, regulated microfinance institutions (MFIs) and mobile financial services. According to the FinScope 2013<\/a> report, 54 percent of Ugandans are now formally financially included, while 32 percent use informal financial services like Savings and Credit Cooperative Organizations (SACCOs).<\/p>\n

These are important gains, but Uganda still faces significant hurdles to broadening financial inclusion.<\/p><\/blockquote>\n

Here are several of the key challenges, some thoughts on how the new strategy aims to tackle them, and the role FINCA can play in helping to expand financial inclusion to 95% of Ugandans by 2022.<\/p>\n

Reduce access barriers to financial services<\/h2>\n

According to the 2013 FinScope Survey, only 16 percent<\/a> of Ugandans live within 1 km of a point of service for a bank. The situation is better for mobile money, as 54 percent live within 1 km of a banking agent<\/a> or other point of mobile money service.<\/p>\n

Yet, even when people make it to a bank branch or mobile money agent, there are other barriers to confront. These include \u201cknow your customer\u201d (KYC) requirements that make it difficult for a poor customer to present acceptable forms of identification, lack of liquidity (cash) at banking agents, limited mobile network coverage interrupting digital transactions, and high interest rates that can range from 22 to 25 percent per annum. Uganda\u2019s new strategy takes aim at these challenges. It also emphasizes making it easier for youth (ages 15 \u2013 17) to open and access financial accounts.<\/p>\n

Build up the digital infrastructure<\/h2>\n

74 percent<\/a> of Ugandans live in rural areas where traditional financial service providers have little incentive to build brick-and-mortar branches. This results in limited access to basic and necessary financial services for bottom of the pyramid (BOP) populations. Even if a point of service can be found, the scarcity of competition means rural poor encounter additional challenges. These include high transaction fees, poor customer service, and even loss of money through illegitimate financial institution scams.<\/p>\n

To overcome these hurdles and incentivize financial service providers to meet the needs of the rural poor, the National Financial Inclusion Strategy will require interoperability of systems among financial service providers. This will make it easier for low-income clients and small business owners to make and accept payments. It also produces cost efficiencies for financial service providers.<\/p>\n

The strategy also seeks to encourage financial sector players to design customer-friendly and intuitive interfaces for products and services. For example, USSD code menus in local languages. Given limited digital literacy in Uganda, intuitive user interfaces are key to increasing the use of digital financial services. The focus on USSD, which works on any type of mobile phone, is especially important given the low smartphone penetration. However, the issue of burdensome fees on mobile money transactions needs to be addressed. Such fees remain one of the biggest barriers to the widespread adoption of mobile money.<\/p>\n

\"Digital