Amidst a wave of new regulations issued by Bank of Uganda (BOU) aimed at bolstering the financial sector, financial institutions have shown remarkable resilience, successfully adapting to the changes while expanding their services.
These regulations entail an increase in minimum working capital requirements for commercial banks from sh25 to 120 billion by December 2022 and sh150 billion by June 2024.
Additionally, the Central Bank raised the minimum capital for credit institutions to 20 billion Shillings by December 2022 and 25 billion Shillings by June 2024, with Microfinance Deposit-Taking Institutions (MDIs) maintaining a minimum of 10 billion Shillings.
These regulatory developments also encompass policies and legislation for bancassurance, agent banking, and Islamic banking, all aimed at promoting financial inclusion.
MDIs, which were previously limited in banking channels, now have the opportunity to extend their services to unbanked low-income and rural populations through agent banking, Islamic banking, and bancassurance.
For instance, Finca Uganda, an MDI, has leveraged agent and digital banking to offer services similarly to commercial banks, benefiting from a more favorable regulatory environment.
However, financial institutions recognize the importance of sensitizing the public on these new developments to encourage their adoption.
Finca Uganda has initiated a three-month campaign to encourage customers to utilize digital and agent platforms, contributing to the national transformation towards a cashless economy.
According to Robert Kakande, the Executive Director, their customers currently conduct 66 per cent of transactions online, and they aim to boost this to 75 per cent by the end of the Gonza Life campaign in October.
The lender is urging the swift conclusion of the regulatory process to enable full implementation of Islamic banking, which they eagerly anticipate.
As part of the industry’s digital transformation, traditional bank branches have reduced as clients are increasingly encouraged to use electronic and agent banking services.
Despite this shift, the banking sector is currently served by approximately 27,000 agents across the country.
This transformative shift towards digital and agent banking services has not only streamlined operations but also encouraged a move towards a cashless economy.
The industry’s evolution has witnessed a reduction in the need for traditional bank branches, as financial institutions wholeheartedly embrace the digital revolution.
With financial institutions leading the way in this paradigm shift, the future of the sector looks promising as they continue to prioritize customer convenience and financial accessibility.
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