Dr. Madina Guloba a Research Fellow from the Economic Policy Research Centre (EPRC) has said that over 74 percent of Ugandans are chronically informal something that has kept financial inclusion an elusive benefit for them.

Most findings have put the level of informality in Uganda at 70 percent while formality is less than 10 percent. The latter is due to certain compulsory requirements such as having a bank account to access loans.

Small informal productions she said lead to lack of incentives to save and  formalizing their operators’ calls for designing of policies, which make SMES more lucrative and economically attractive. “Once this is done, people will be able to borrow hence driving financial inclusion upwards,” she said.

Guloba was a panelist during the validation for FinScope Report on Gender and Youth held in October 17, 2018 at Imperial Royale in Kampala by Financial Sector Deepening Uganda.
She blamed the recent taxation on mobile money, a platform she says, drew many informal dwellers close to formal financial inclusion.

Gender and Youth FinScope dissemination event on October 17 2018 Imperial Royale Ft Madina

“If you want people to be more empowered to participate in production, then do not touch something that is easy for them to access,” she said denoting the taxes on mobile money transactions. She also raised an outcry that the microfinance institutions have some of the most high interest rates for loans.

However, Francis Wasswa, a Research & Product Development Manager at Pride Microfinance Limited said they offer competitive rates in line with the market and as per Bank of Uganda regulations.

He said at times the loan portfolio is bigger than savings and they are forced to borrow money for lending which attracts costs warranting a rise in interest rates.

Partaking in the same panel, Michael Jjingo, the Chief Manager Business Growth at Centenary Bank called for further mentorship in business planning, health insurance and management of growth for women. He says 65 percent of businesses are run by women who are inhibited by lack of collateral when it comes to accessing loans. He said that through the Super Women loan product women can get loans from Centenary Bank after presenting two guarantors.

Slyvia Kawe, the Programme Manager women and youth financial inclusion programme at CARE Uganda, says 6000 groups have been linked to the formal financial sector by CARE Uganda through working with development partners and government. Kawe says low network coverage as well as low branch coverage for banks, especially in rural areas affects knowledge sharing and adoption of formal financial systems.

The yet to be published FinScope Report on Gender and Youth indicates that financial inclusion has nearly doubled over the past years.

Is Government Willing to Drive Financial Inclusion?

Many debates on financial inclusion don’t end without mentions of the need for all stakeholders to synergize in order to spread financial inclusion across different social groups.

Golooba Lwanga the Commissioner Financial Services, Ministry of Finance, Planning and Economic Development told stakeholders during the validation that Government has made it a priority to improve financial inclusion as part of the broader national development plan.

He said that financial inclusion can aid self-employment, improve household consumption, support greater local economic activity, and reduce inequality.

He added that the main barrier to increasing uptake of formal financial services in Uganda is the fact that 78% of Ugandan adults are rural-based and financial service providers find it costly to extend financial services to rural areas.

Golooba called for more innovations that can bring financial services closer to the rural population in a less costly manner

Reforms to support Government’s financial inclusion agenda include the following:

➢ Operationalization of the Financial Institutions (Amendment) Act, 2016 that provides for bancassurance, Islamic and agent banking;

➢ Operationalization of the Tier 4 Microfinance Institutions and Money Lenders Act, 2016 and the successful setting up of the Uganda Microfinance Regulatory Authority

➢ The National Financial Inclusion Strategy (NFIS) 2017-2022 to streamline and enhance public and private sector efforts towards promoting financial inclusion in Uganda;

➢ Implementation of a successor project to RFSP with the support of the International Fund for Agricultural Development (IFAD) -the Project for Financial Inclusion in Rural Areas (PROFIRA) is designed to strengthen the rural financial services infrastructure;

➢ Strengthening the capacity of the Microfinance Support Centre Ltd (MSCL) to provide affordable wholesale microfinance and additional resources have been allocated to the company this FY.

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