In 2011, Uganda became a signatory to the Alliance for Financial Inclusion (AFI) – a peer-network of some 120 predominantly developing countries that connects central bank governors and other financial policymaking bodies, in the global financial inclusion push. The Bank of Uganda (BOU) was also one of the original 17 financial regulatory institutions to make specific national commitments to financial inclusion under The Maya Declaration. The Maya declaration draws its name from the AFI Global Policy Forum held in Riviera Maya, Mexico in 2011.
BOU then moved on its commitments by setting up the Financial Inclusion Project whose overall objective is to increase access to financial services and empowering users of financial services to make rational decisions in their personal finances so as to contribute to economic growth. The project is built around four pillars including Financial Literacy, Financial Consumer Protection, Financial Innovations, and Financial Services Data and Measurement.
However, these positive steps by the Central Bank have not necessarily elicited a proactive response from the government – particularly the Ministry of Finance Planning and Economic Development (MOFPED) – which is the BoU’s line Ministry. While the Central Bank included financial inclusion in their domestic mandate alongside financial stability and integrity, only recently did the Ministry of Finance, elevate its Microfinance Office (where the Financial Inclusion policy has been incubated in recent years) to the Department of Financial Services, to shore up the policy governing financial services in Uganda and indeed bringing together all stakeholders in financial services.
The new department has recently moved to bring policy leaders including the freshly minted Financial Intelligence Authority (FIA) – mandated with combating money laundering, to a consultative meeting on the financial sector development strategy. The Bank of Uganda (BOU), World Bank, Association of Microfinance Institutions in Uganda (AMFIU), Capital Markets Authority (CMA), Insurance Regulatory Authority (IRA) and donor groups involved in financial inclusion like German Development Cooperation GIZ, Financial Sector Deepening Uganda (FSDU), (British) Department of International Development (DFID) and the United Nations Capital Development Fund also participated in these consultations.
These developments are highly praiseworthy and suggest a sense of renewed commitment to financial inclusion, but it is still fall short of practical actions by the government. Over the last 5 years, leaders in the financial markets have been calling for amendments to the Financial Institutions Act 2004, to address new developments in the financial industry and to regulate the sector better, with proposals on Agency Banking which, if adopted can increase access to formal financial services by allowing non-bank institutions to offer basic banking services to the unbanked, Islamic Banking – which promises to offer ‘interest free’ financing under Shariah Law, and Bancassurance – that will allow persons access Insurance services using the banking sector.
With the current growth of Digital Financial Services (DFS) especially mobile money and aggregated push/pull financial services between banks and other services like National Water and Sewerage Corporation (NWSC) and UMEME (National Power Distributor) one can tell that there is a need for government to become more involved in the long term growth of these sectors and leverage them to enhance financial inclusion. While government’s current posture – limited regulation – has the benefit of allowing the financial sector to grow, without stifling innovation (as is the case in markets such as Nigeria where the government put regulation in place before growth of DFS’s) and is partly responsible for the rapid development of DFS’s in Uganda, it is imperative that government sets up a policy framework that can match these developments.
Mobile financial services – given their current premise on mobile phones, and with almost every Ugandan household having one member possessing a sim-card, can be supported further if government instituted policies that create more opportunity for our mostly informal financial sector, to become more formalized through mobile phones, and in the process increase access and usage of formal financial services – especially for the poor. The National Identity Card project having registered noticeable success, with over 13million National IDs reportedly issued presents an immense opportunity that government can use to synchronize its current declared commitments – Alliance for Financial Inclusion, Sustainable Development Goals (SDGs) and Vision 2040, National Development Plan II with a more definitive, identifiable and enforceable policy that demonstrates commitment to true inclusion.