OPINION: Financial Inclusion Will Propel Uganda to Middle-Income Status Quickly

By Kyetume Kasanga

The theme of Uganda’s 2nd National Development Plan (NDPII) currently under implementation is “Strengthening Uganda’s Competitiveness for Sustainable Wealth Creation, Employment and Inclusive Growth”. There are many avenues for households and enterprises to create wealth, employment and inclusive growth sustainably. Financial inclusion is one of the most critical.

The 21st Governor of the Reserve Bank of India (India’s Central Bank), Dr Yaga Venugopal Reddy coined the term “financial inclusion” in 2005, to mean the delivery of financial services to sections of disadvantaged and low-income segments of society at affordable costs.

The Bank of Uganda and the Ministry of Finance, Planning and Economic Development launched the Uganda National Financial Inclusion Strategy on October 26, 2017.

Critical and timely, it is a clear demonstration of the NRM Government commitment to prioritization of financial inclusion in the quest to attain the lower middle-income status. It will, thus, increase access to, and use of, sustainable financial services by the rural poor.

Wealth, employment and inclusive growth will be created when individuals and enterprises access affordable financial services that meet their socioeconomic needs. Such needs include starting and expanding businesses, receiving and making payments, savings to prepare for tough times, borrowing to grow their enterprises, insurance against disasters, investing in accessing social services, managing risk and weathering financial shocks. These should reduce their vulnerability, enhance economic independence, and improve their overall financial health and quality of lives sustainably.

According to the latest World Bank Report on Global Wealth, “The Changing Wealth of Nations, 2018: Building a Sustainable Future”, Uganda is economically better than only 24 of the 195 countries in the world that are recognized by the United Nations.

We have a Gross Domestic Product (GDP) per capita of approximately US$700 (about Shs2.6m) at current market prices. Suffice to say that since the advent of the NRM Government in 1986 our real GDP has grown at an average annual rate of about 6.2%, making our economy one of the fastest growing in Africa.


This monumental feat has been accompanied by a classic reduction in the poverty rate from 56% in 1992 to 19.1% in 2016 although it climbed to 27% in 2017, according to the Uganda Bureau of Statistics’ latest National Household Survey Report.

Our transformation from a country characteristic of irregular and unstable development patterns to one of sustained economic growth and diminished poverty calls for weathering any vagaries.

Our target is to attain lower middle-income status by 2020 with an annual per capita income of US$1,033 (about Shs3.8m), according to NDPII. This means all Ugandans, including children, who are not working should earn that amount per year by 2020.

The middle-income goal is anchored on household earnings translating into inclusive growth in terms of health, education and access to land, emerging opportunities and capital.

It is worthwhile noting, though, that as the economy grows it is catapulting some Ugandans ahead and leaving others behind, according to National Planning Authority Board Chairman Dr Wilberforce Kisamba Mugerwa. It is, therefore, possible that some individual Ugandans will attain the lower middle-income status earlier than others.

Accelerating efforts toward financial inclusion calls for increased citizens’ financial literacy and capability to uptake different financial services and products. Alongside is the need to devise useful and relevant financial products tailored to consumer needs.

The other is to ensure that financial access and services extend to hard-to-reach populations, including women and the rural poor. However, to ensure responsible provision of financial services, creating this innovative and competitive space should be accompanied by appropriate consumer protection measures such as formulation of policies and regulations.

Availability of the citizens’ National Identification Number or Card has now made it easier to open a bank account, and access capital or credit. There is need for low-cost and accessible means for the identification documents to be authenticated or replaced when lost.

When countries institute a national financial inclusion strategy, they increase the pace and impact of reforms. By launching the financial inclusion strategy last year, Uganda joined about 60 countries that have made commitments to financial inclusion, and more than 30 that have either launched or are developing a national strategy, out of the 195 countries globally.

However, Uganda’s financial inclusion journey dates back to 2001. As a result, the citizens’ access to financial services improved dramatically: more than half (54%) of our adult population now has access to an account at a formal financial institution.

This is almost twice as many as in 2009 (28%), partly due to mobilization of the rural population to join village savings groups such as Savings and Credit Cooperative Organisations (SACCOs) and Village Savings and Loan Associations (VSLAs) to save money for boosting their small enterprises. The entry and fast penetration of mobile money services have addressed poor connectivity by accessing geographically hard-to-reach areas that the formal banking institutions could not.

The titanic growth was touched off and buttressed by the NRM’s strong economic fundamentals, including a prudent government fiscal policy, responsive private investment, stable prices and a liberalised economic environment.

Consequently, financially excluded persons declined significantly from 4.3m Ugandans in 2009 to 2.6m in 2013, capping a great improvement in the financial system soundness and efficiency.

Government’s role is to ensure that the structures and engines running the economy are well designed and serviced for success and engendering confidence. Fortunately, we have demonstrated patriotic commitment to reducing costs of doing business in the country.

This is by heavily investing in infrastructure, improving efficiency in service delivery, enhancing agricultural production and productivity, creating employment for the youth and women, supporting SMEs, and focusing on human resource development to improve skills and innovation.

Drawing in international experience and investment to enhance technology transfer and diffusion is necessary as the economy diversifies and investors move into value addition especially in processing industries. Deliberate inculcation of the business culture should empower communities to reject retrogressive ideas that impact their socioeconomic groupings.

Additionally, such groups should be well supervised and protected to operate prudently, which necessitates establishment and facilitation of an effective audit and investigations organ for them. Only then shall we achieve effective financial inclusion and consequent propulsion to middle-income status quickly.

The writer is the Principal Information Officer at the Ministry of ICT & National Guidance

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