Entry of new players healthy for financial sector- BOU

More oversight from Bank of Uganda is expected over payment systems once the National Payment Systems Law is passed this year 

In Summary

• With over Shs20 bilion sunk into its new operations, the credit institution will continue to target low income earners, with a special interest in women and youths.

By Eronie Kamukama

More oversight from Bank of Uganda is expected over payment systems once the National Payment Systems Law is passed this year.
The financial sector regulator wants banks to support the law and its implications.

“Given ongoing consultations with different financial players and stakeholders, we managed to go through drafting of the National Payments System law which is going to bring more order in terms of entry and exit in doing business. Very soon Bank of Uganda will also be issuing licenses to other different categories of payment service providers such as those in electronic money issuance, operators of systems as well as financial instruments but I know from the banking side the competition may look skewed, this should be healthy and we are encouraging a lot of dialogue among players,” Mr John Chemonges, the director National Payments System BOU said.

The National Payments system according to BOU consists of institutions, instruments, procedures and technology that facilitates the circulation of money within and outside the country. It is expected to ensure safety of all payments, foster consumer protection, and enable increased access to electronic payments while reducing use of cash.

Banks are already working together through the shared banking platform that facilitates settlement systems especially with the implementation of agent banking. Mr Chemonges said the same is expected of banks as other regulations to support digital financial services are in the offing.

He made the remarks at the launch of Brac Uganda Bank Limited, following the organisation’s move from a tier 4 institution to a regulated tier 2 credit institution.

Customers will now be able to do more according to Mr Jimmy Adiga, Brac Uganda Bank’s managing director.

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“We have been providing them with loans, now we want them to do different types of savings, micro insurance and money remittances,” Mr Adiga said. The institution’s move, he said, was a signal from customers. The demand for these services is what made us to apply for this license. When we introduced insurance, the uptake was overwhelming which meant the poor also need it.”

With over Shs20 bilion sunk into its new operations, the credit institution will continue to target low income earners, with a special interest in women and youths. Bank accounts are expected to grow from the existing 270,000 to one million in the next 24 months. The bank’s strategy is to tap into beneficiaries of its programs in agriculture, education and health to hit the one million target.

“Movement of goods and services from where they are concentrated to where they are scarce requires financing. Financing requires convenience in terms of access and affordability with most of would be players in rural areas to address those market imperfections do not get access to funding. We have been giving them credit but now we want to encourage them to save their excess income when they transfer goods,” Mr Adiga says.

ekamukama@ug.nationmedia.com