This article was first published in the New Vision on January 30, 2025

As the digital financial revolution in Uganda grows in leaps and bounds, it faces its biggest stress test: online fraudsters. Mobile money and digital payments have opened new doors for convenience – to save, borrow, pay vendors, and deposit in bank accounts. Official numbers tell a remarkable story. Mobile money registration in Uganda surged to 36.8 million in 2023, with 64% of adults now using digital transfer services, up from 57% in 2018.

This digital transformation has bridged gender and geographic divides, with 61% of women and 67% of men embracing these services. At least 60% of rural residents have joined the digital financial wave. The COVID-19 pandemic accelerated this transformation, with the World Bank reporting an estimated 40% of adults as first-time users of digital payments during lockdowns. However, this rapid adoption has exposed a dangerous underbelly – widespread digital fraud that threatens to derail progress toward financial inclusion.

A 2021 report by Innovation for Poverty Action showed that 47% of Ugandans using digital financial services have faced attempted fraud through phone or SMS, while 33% have encountered phishing attempts. Even more concerning is that most incidents go unreported.

The 2023 Uganda Police Force Annual Crime Report showed that only 245 cybercrimes were reported and of the UGX 1.5 billion lost to cybercrime, only UGX 377.4 million was recovered. The impact of this fraud epidemic extends far beyond immediate financial losses. Digital scams particularly target our most vulnerable populations, who often lack digital literacy skills. When these citizens fall victim to fraud, they are not just losing money but with it, faith in the formal financial system is lost, and many retreat to cash-based transactions and informal saving methods. This ultimately perpetuates financial exclusion.
For financial service providers, reputation damage requires costly investment in cybersecurity and software upgrades, diverting resources that could otherwise expand services and drive innovation. This vicious cycle threatens to slow the very digital financial inclusion we’re trying to achieve.

While Uganda has established legal frameworks through various acts – including the Computer Misuse Act 2011 and the Data Protection and Privacy Act 2019 – these regulations have proven insufficient in deterring digital fraud. What we need is a holistic approach to cybersecurity that goes beyond mere legislation.

The path forward requires a three-pronged strategy: strengthening cybersecurity measures by service providers, launching comprehensive public education campaigns about digital fraud, and promoting both financial and digital literacy. Implementation protocols must be reinforced with appropriate tools and human resources to provide effective deterrence and redress for victims. As Uganda stands at this crucial juncture, we must act decisively to protect our digital financial future. With 19% of Ugandan adults still financially excluded, we cannot allow cybercrime to reverse the gains we’ve made. The time for enhanced cybersecurity measures and public awareness is now – before trust in digital financial services erodes further and undermines the remarkable progress we’ve achieved in financial inclusion.

Our digital financial revolution must not become a cautionary tale but rather a model for secure, inclusive financial growth in Uganda.

The writer is a research analyst at the Economic Policy Research Centre at Makerere
University.