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World Bank: Uganda's Financial Inclusion Increases, Credit Stagnates :: Uganda Radionetwork
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World Bank: Uganda's Financial Inclusion Increases, Credit Stagnates

In its Uganda Economic Update report, the World Bank says presently approximately eight million Ugandan adults have access to an account at a financial institution with these accounts allowing them to conduct a range of transactions.

Audio 3

The World Bank says Uganda's level of financial inclusion has increased significantly compared to recent years.

In its Uganda Economic Update report, the World Bank says presently approximately eight million Ugandan adults have access to an account at a financial institution with these accounts allowing them to conduct a range of transactions.

Rachel Sebudde is World Bank Uganda's Senior Economist:

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The report says despite the increase in financial inclusion, a much smaller proportion of individuals and firms are able to access credit from the formal financial system.

Credit provided by the financial system, according to the World Bank, account for less than an eighth of Uganda's GDP. Those unable to access credit are forced to rely on informal sources of finance or their own, their families' or their friends' often very limited resources.

As a result, says the World Bank, a significant proportion of Ugandans is unable to increase its level of productivity and too many Ugandans continue to rely on subsistence activities, particularly in agriculture.

Rachel Sebudde again:

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The World Bank says the main constraint on access to and efficient use of financial services to support growth and increased productivity is the high cost of credit.

In addition, says the World Bank, the financial sector suffers as a result of low levels of public confidence in formal institutions largely due to historical experiences related to a series of crises and upheavals in the financial system.

According to Sebudde, Ugandans are increasingly becoming cautious about saving with formal financial outfits.

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Another significant development in the financial system, according to the report, is the introduction of mobile money which is facilitating inclusion of many people and causing a number of changes to the financial system.

Dr. Charles Abuka, the Director Financial Stability in the Bank of Uganda, says although public confidence in the financial system indeed collapsed between 1971 and 1985 that is no longer the case from 1986 to date.

Dr. Abuka says the financial system will keep getting better especially with reforms in governance, capital and liquidity buffering, risk analytics and more intrusive supervision by the central bank.

In Uganda, institutions providing financial services include banks, credit institutions (CIs), micro-finance depository institutions MDIs), and savings and credit cooperative organisations (saccos).

There are also a range of non-bank financial institutions like investment clubs, burial societies, insurance companies, pension schemes, securities industry, mortgage institutions, and non-governmental organisations operating in the country.

Commercial banks, CIs and MDIs belong to the first, second and third tiers of the financial system regulated by the Bank of Uganda. The others are regulated by other statutory bodies or through self-regulation.

Presently, Uganda has 24 commercial banks from a figure of 25 after DFCU Bank bought Crane Bank.

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