Uganda, a landlocked country in Eastern Africa with a population of 39 million people, started the journey from a cash-dominated economy to a digital-based economy in 2009. Currently, several financial institutions, mobile network operators (MNOs) and third party operators offer digital financial services (DFS) in the country.
The DFS offering is evolving from basic airtime top-ups and money transfers to more advanced products such as bulk payments, merchant payments, and saving and lending products. However, the market is still grappling with issues such as fraud at customer and agent levels. Other issues include low density of agents in rural areas, low mobile phone penetration levels and limited product offerings that meet customer needs.
At the regulatory level, the Financial Institutions Act (FIA) was passed by the Parliament in January 2016 and assented into law by the President in March 2016. The FIA legalized agency banking, so commercial banks are now able to engage in agency banking.
Where We Are
- Interoperability continues between banks and mobile wallets, with growth in the pull-and-push functionality
- Advanced products such as bulk payments are entering the market, and there are plans for savings and lending products from MNOs
- Mindset of MNOs is shifting to look at developing the whole ecosystem
- MNOs and financial institutions are looking at tapping into value chains and reaching rural communities
What We Did So Far
- MM4P identified and successfully funded seven projects with Centenary Bank Uganda, Equity Bank Uganda,FINCA Uganda and MTN Uganda. Some of the funding involved cross-cutting partnerships that brought together DFS providers and other key stakeholders, such as Fenix International (solar company), Kyagalanyi (coffee exporter) and Yo Uganda (telecom-focused software company).
- MM4P conducted market research in agro value chains to inform providers, and shared the results of a payment diagnostic and a regulatory impact assessment with the Government of Uganda. The opportunities identified for digital payments included bulk payments to farmers and high volume areas such as government-to-person (G2P) and business-to-government (B2G) payments.
- MM4P reinforced its relationship with regulatory bodies, such as the Bank of Uganda and the Ministry of Finance, through sponsored visits to other markets to learn from successful DFS regulatory counterparts. MM4P also strengthened its relationship with MNOs by forming an MNO collaboration group that brings together MNOs to talk about general market issues and identify ways of resolving them. MM4P formed a bankers’ collaboration group as well, although it is still in its infancy.
- MM4P identified 20 investment opportunities to be further explored in 2016. These investments involve technical assistance and grants to improve providers’ operations and agent networks in rural areas, to adapt DFS products to meet rural customer needs, to increase uptake of DFS in seed oil, tea and dairy agro value chains, and to explore DFS in the tourism value chain and with savings and credit co-operatives (SACCOS) and village savings and loans associations (VSLAs).
- MM4P successfully hosted the DFS Goes Rural conference, a global knowledge sharing event that brought together partners and practitioners from all around the world to examine DFS in a rural context
- MM4P continued to increase the capacity of its partners in managing an agent network. In March 2015, 19 people from 10 institutions travelled to Mbale to complete the five-day Core Agent Network Accelerator course by the Helix Institute of Digital Finance.
- MM4P ended the year with a G2P exposure visit to South Africa to study the South African Social Security Agency’s programme. Five MM4P countries including Uganda were represented in the 20-person delegation of government officials.
What We Plan for This Year
- 50% active registered DFS users as percentage of adult population (total 11,782,000)
- Tiered know-your-customer (KYC), agent, customer protection enabling policy
- More collaborations in agro and tourism value chains
- Banking partners operating agency banking
- Partners meet and share experiences regularly
- Several transformative and competing services
- Financial services available (credit, insurance, savings)