By Esther Nakkazi
The Economic Policy Research Centre (EPRC) has launched the third FinScope Uganda 2013 Survey Report on 28th November 2013 at the Kampala Serena Hotel.
Under the theme ‘Unlocking Barriers to Financial Inclusion in Uganda’ the report examines the demand, access and usage of financial services in Uganda through four major access strands namely: saving and investment; credit and borrowing; remittances and money transfer; insurance and risk management.
In addition, the FinScope report also establishes the level of financial literacy among the adult population and their perception of consumer protection offered by financial institutions.
Sarah Ssewanyana the executive director EPRC said that they hope that the FinScope III survey Report will contribute to enhancing the landscape of financial inclusion, and assist in the development of appropriate products and services, including the design of relevant policies and necessary regulatory frameworks to bring those that are financially excluded into the mainstream of development.
“The importance of this survey results is underscored by the high levels of financial exclusion prevailing in the country. In Uganda, Financial Inclusion remains a challenge in spite of the many gains and successes we have achieved in the financial sector in the last 20 years,” said Maria Kiwanuka the minister of Finance.
The FinScope III survey for Uganda follows two previous surveys' FinScope I and II carried out in 2006 and 2009, respectively. And like these two earlier reports, FinScope III gathered detailed information from the adult population (individuals aged 16 years and above), relating to: financial and risk management strategies; financial discipline and knowledge; preference for financial service providers; usage and attitude to mobile money technology; rural and agriculture issues; remittances; and asset accumulation patterns.
Unlike earlier FinScope surveys, the 2013 FinScope III included a specific section on mobile money as well as additional questions to reflect the new changes in the financial landscape. It is expected that the survey will provide deeper insights and understanding on the behaviour of people and their needs for financial services, said Dr. Ssewanyana.
FinScope surveys are being implemented in a number of African countries with the objective of determining the levels of access to, and use of, financial products and services by adult population 16 years or above.
“Increased financial inclusion can be achieved through opening bank accounts, increasing the level of savings and investments and securing loans from formal financial institutions, which are registered and regulated,” said Justine Bagyenda, the executive Director Supervision Bank of Uganda.
“Some of the findings from this 2013 FinScope survey have shown that we might need to accelerate our reforms or perhaps review them, said Ms. Bagyenda.
For instance the FinScope report says a relatively small proportion of adult Ugandans, i.e. 20% or 3.4 million are the only ones currently using the formal financial institutions including banks. The low level of using formal institutions (i.e. commercial banks, MDIs and credit institutions) is reflected in the recorded low levels of savings, borrowing and access to formal insurance.
“Clearly, there are some economic implications arising from this situation and Bank of Uganda is committed to studying the results and providing further guidance for improvement,” said Bagyenda.
The report notes a tremendous improvement in financial access through the non-bank formal institutions and outlets including SACCOS, Micro Finance Institutions, FOREX Bureaus, Insurance companies as well as mobile money. Mobile money services have contributed over 90% of the growth of these channels put together.
“Mobile money services could be improved further by linking to formal banks through new innovative products which can increase access and use of financial services in Uganda,” said Kiwanuka.
She also noted that SACCOs are growing as an important avenue for improving the number of adult Ugandans holding accounts. Hence, reviewing the regulation and product structure of mobile money services and SACCOs could enable a larger proportion of adult Ugandans to access formal products and services.
Financial services such as savings products, credit and loans, payment and money transfer services, provide the population with greater capacity to stabilize and increase their incomes. In addition financial services help individuals and communities to build assets and cope with shocks. Financial products have proven to be great tools that mitigate the effects of low, irregular and unreliable incomes which keep many people below the poverty line.
According to the survey findings, only 20 percent of adults in Uganda had access to a formal bank account and only 12 percent borrowed formally in the last 12 months. Only 2% of adults had any form of formal insurance.
The small numbers suggest a critical need for a further push to the financial inclusion agenda to ensure that the people at the bottom of the pyramid join the formal financial system, reap benefits and improve their financial well-being, said Ms. Kiwanuka.
Financial inclusion is a central theme for all of us because most of those in poverty do not have access to financial services.