UGANDA: BoU sets parameters to drive cashless economy

Bank of Uganda has set out four strategic parameters on which it seeks to drive Uganda into a cashless economy.

While responding to Daily Monitor inquiries over the weekend, Ms Charity Mugumya, the Bank of Uganda director communications, said the Central Bank had put in place four strategic objectives, among them promoting electronic payments and e-banking as the major drivers for the cashless economy.

The other objectives, she said, include implementing the national financial inclusion strategy (2017-22), which involves building digital infrastructure, implementing the strategy for financial literacy (2019/24) and making payment services affordable.

In August last year, Bank of Uganda directed electronic card payments service providers to remove extra charges on transactions made through electronic means at point of sales.

This, the Central Bank said, would help to make electronic payments more affordable and desirable.

The Central Bank, under the National Payment Systems Policy, had set 2022 as the year in which Uganda should have achieved a cashless economy.

However, Uganda, according to the 2019 Bank of Uganda annual report for the year ended June, is still a largely cash economy with cash payments representing at least 96 per cent of completed transactions.

In 2019, Bank of Uganda indicated, cash payments had risen above the annual average of Shs423b to Shs544b.

The growth represented an increase of 20 per cent from Shs455b recorded in the year ended June 2018.

The Central Bank has previously indicated that achieving a cashless economy will take some time but even then, there should be a purposed agenda driven by strategic engagement, especially through electronic systems.

Uganda currently has only two million electronic cards through which payments can be made.

However, private sector innovations such as mobile money, single purpose stored value cards, e-commerce, aggregators, and remittance companies such as Western Union, continue to drive the country closer to a cashless economy.

In its 15th Edition report titled: Digital Solution in a Time of Crisis, released last month, the World Bank Uganda, said the digital economy had already powered the rise of financial inclusion in Uganda with greater financial account ownership through mobile money.

Mobile money, one of the platforms on which the Central Bank is driving the cashless economy, currently has penetration of 69.2 per cent from 35 per cent in 2014.

Key driver
According to the World Bank, digital technology will be a key driver in achieving a cashless economy with Fintechs offering a number of payment solutions, digital credit applications, and even some innovative insurance products.