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Bank of Uganda Financial Inclusion Project
Strategy Paper on Financial Inclusion
July, 2013
Project Initial Duration: 3 Years (2012-2015)
Project Start Date: July, 2012
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Table of Contents List of Abbreviations and Acronyms .................................................................................................................................. 1 The Bank of Uganda Financial Inclusion Project Strategy Paper .................................................................................... 4
1. Background.................................................................................................................................................................... 4 1.1. Statement of the Problem .................................................................................................................................... 4
1.2. Status of financial Inclusion in Uganda ............................................................................................................ 4
1.2 (a) Demand Side Data on Financial Inclusion ......................................................................................................... 4 1.2 (b) Supply Side Data on Financial Inclusion ........................................................................................................... 5
2. Financial Inclusion Project ........................................................................................................................................... 6 2.1 Rationale for BOU’s Engagement in Financial Inclusion ............................................................................... 6
2.2 Overview of the Financial Inclusion Project .................................................................................................... 6 2.3 The Bank of Uganda Financial Inclusion Internal Project Structure ............................................................. 7
2.4 Interaction with External Stakeholders ............................................................................................................. 8 3. Detailed Strategy Frameworks for the Financial Inclusion Pillars......................................................................... 8
3.1 Pillar 1: Financial Literacy................................................................................................................................... 8
3.1.1 Background to Financial Literacy .................................................................................................................. 8 3.1.2 Purpose of this Pillar ....................................................................................................................................... 9
3.1.3 Specific Objective ............................................................................................................................................. 9 3.1.4 Role of the BOU FLSC ..................................................................................................................................... 9
3.1.5 Membership of the FLSC ................................................................................................................................ 9 3.1.6 External Partnerships ...................................................................................................................................... 9
3.1.7 FLSC Strategic Priorities ............................................................................................................................... 10 3.1.8 Activity Timing and Expected Output for the Financial Literacy Sub Committee .............................. 10
3.2 Pillar 2: Financial Consumer Protection ......................................................................................................... 11
3.2.1 Background to Financial Consumer Protection ......................................................................................... 11 3.2.2 Purpose of this Pillar ..................................................................................................................................... 11
3.2.3 Specific Objective ........................................................................................................................................... 11 3.2.4 Role of the BOU FCP SC ............................................................................................................................... 11
3.2.5 Membership of the FCP SC .......................................................................................................................... 12 3.2.6 External Partnerships .................................................................................................................................... 12
3.2.7 Strategic Priorities .......................................................................................................................................... 12 3.2.8 Activity Timing and Expected Output for the FCP Sub Committee. ..................................................... 13
3.3 Pillar 3: Financial Innovations .......................................................................................................................... 13
3.3.1 Background to the Financial Innovations................................................................................................... 13 3.3.2 Purpose of this Pillar ..................................................................................................................................... 14
3.3.3 Specific Objective ........................................................................................................................................... 14 3.3.4 Role of the BOU FISC .................................................................................................................................... 14
3.3.5 Membership of the FISC ............................................................................................................................... 14 3.3.6 External Partnerships .................................................................................................................................... 14
3.3.7 Strategic Priorities .......................................................................................................................................... 14 3.3.8 Activity Timing and Expected Output of the Financial Innovations Sub Committee ......................... 15
3.4 Pillar 4: Financial Services Data and Measurement (FSDM) ........................................................................ 16
3.4.1 Background to the Financial Services Data and Measurement ............................................................... 16 3.4.2 Purpose of this Pillar ..................................................................................................................................... 16
3.4.3 Specific Objectives ......................................................................................................................................... 16 3.4.4 Role of the BOU FSDM SC ........................................................................................................................... 16
3.4.5 Membership of the FSDM SC....................................................................................................................... 16 3.4.6 External Partnerships .................................................................................................................................... 16
3.4.7 Strategic Priorities .......................................................................................................................................... 16 3.4.8 Activity Timing and Expected Output for the FSDM Sub Committee .................................................. 17
4. References .................................................................................................................................................................... 18
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List of Abbreviations and Acronyms AFI Alliance for Financial Inclusion AMFIU Association of Microfinance Institutions in Uganda BOU Bank of Uganda CBD Commercial Banking Department CB Commercial Banks CFI Centre for Financial Inclusion CMA Capital Markets Authority DFID Department for International Development EDS Executive Director Supervision EXCOM BOU Executive Management Committee FCP Financial Consumer Protection FCP SC Financial Consumer Protection Sub-Committee FE Financial Education FEWG Financial Education Working Group FI Financial Inclusion FIDWG Financial Inclusion Data Working Group FIP Financial Inclusion Project FISC Financial Innovations Sub-Committee FL Financial Literacy FLAG Financial Literacy Advisory Group FLFCP Financial Literacy and Financial Consumer Protection FLISG Financial Literacy Information Sharing Group FLSC Financial Literacy Sub-Committee FLWG Financial Literacy Working Groups FMD Financial Markets Department FS Financial Stability FSDM Financial Services, Data and Management GIZ Gesellschaft für Internationale Zusammenarbeit IRA Insurance Regulatory Authority JWG Joint Working Group KFD Key Facts Development MDI Micro Deposit Taking Institutions MDIA Micro Deposit-Taking Institutions Act MFIS Micro Finance Institutions MNO Mobile Network Operators MOES Ministry Of Education and Sports MOFPED Ministry Finance, Planning and Economic Development MoU Memorandum of Understanding MWG Media Working Group NBFI Non Banking Financial Institutions NCDC National Curriculum Development Centre NSSF National Social Security Fund PM Project Manager PSD Payments and Settlements Department
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ROWG Rural Outreach Working Group RTC Regulators Technical Committee SACCOs Savings and Credit Cooperative Organizations SFI Supervised Financial Institutions SFLU Strategy on Financial Literacy in Uganda UBA Uganda Bankers Association UBOS Uganda Bureau of Statistics UCC Uganda Communications Commission UIA Uganda Investment Authority UCSCU Uganda Cooperative Savings and Credit Union WCA Workplace, Clubs and Associations WCAWG Work places, Clubs and Associations Working Group WG Working Group YWG Youth Working Group
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FOREWORD By Mrs. J. Bagyenda, Executive Director Supervision
Strengthening Financial Inclusion is one of the Strategic Initiatives in the BOU revised
Strategic Plan 2012 to 2017. Bank of Uganda has started implementing various initiatives to
improve financial inclusion in Uganda as a response to financial innovations, gaps in financial
education, financial consumer protection, financial deepening as
well as issues of access and quality of financial services.
The pace of technological advancement has resulted into
unprecedented proliferation of financial innovations. Despite
these developments, the rural areas in Uganda and many Sub-
Saharan African countries remain unbanked. Limited financial
services are provided in the rural areas and mainly by the
informal sector in a fragmented, unsafe environment with
limited linkages. Without stifling financial innovations, Bank of
Uganda aims to provide adequate responses to these challenges
by creating an enabling environment for Financial Inclusion (FI)
activities.
Bank of Uganda has taken up the FI activities on a project basis under the Supervision
Function. The overall objective of the project is to increase access to financial services and
empower the users of financial services to make rational decisions in their personal finances so
as to contribute to economic growth. The project will run for an initial period of three (3) years
2012-2015 and relevant sub-strategies will be developed and implemented during this period.
The activities outlined in this strategy paper are based on four (4) Pillars namely: Financial
Literacy, Financial Consumer Protection, Financial Innovations (includes: Mobile Money and
Agent Banking) and Financial Services Data and Measurement. The main reasons for
prioritizing financial inclusion activities are:
Strengthening financial literacy through financial education initiatives in collaboration with
a broad range of actors both within and outside the financial sector.
Strengthening financial consumer protection and promoting public awareness of consumer
rights and responsibilities to enhance trust and transparency between financial institutions
and clients
Enhancing dialogue with financial institutions on the issues of access to financial services.
Providing a regulatory framework to promote technological innovations to increase access
and usage of financial services while ensuring safety and stability of the financial sector.
Maintaining data on access, usage and quality of financial services to enhance
understanding of the gaps that need to be closed by the key stakeholders.
Bank of Uganda has taken a national approach in the implementation of the Financial
Inclusion activities by involving many stakeholders both in the private and public sector
together with Government and development partners. GIZ (as part of German Development
Cooperation) specifically played a key role in the development of this strategy paper.
I thank you all for partnering with BOU in the development and implementation of financial
inclusion activities in Uganda.
J. Bagyenda (Mrs.)
Executive Director Supervision
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The Bank of Uganda Financial Inclusion Project Strategy Paper
1. Background
1.1. Statement of the Problem
Financial Inclusion is defined by different policy makers and advocates in different ways
depending to the level of development and needs of a country at a time. The Centre for
Financial Inclusion at Accion (CFI) defines full financial inclusion as a state in which all people
who can use financial services have access to a full suite of quality services, provided at
affordable prices, in a convenient manner, and with dignity for the clients. Financial services are
delivered by a range of providers, in a stable, competitive market and reach everyone who can
use them.
Uganda has made improvements over the years in terms of financial services delivery
outlets/channels offered by both the formal and informal financial institutions. Despite that, the
level of adults Ugandans above 18 years who are excluded from financial services remains
significant. The comparison between the Finscope Uganda survey 2006 and 2009, showed
improvement on the number of the financially excluded adult population, however this was
largely a graduation from exclusion to the informal financial institutions while the formal
financial institutions showed only 1percentage point improvement in financial services access.
The results of the geo spatial mapping exercise (2013) of financial outlets in Uganda1 indicates
that while the urban areas are well covered in terms of financial services outlets, the rural areas
have a long way to go even after taking into consideration the SACCOs and mobile money
outlets.
The BOU Financial Inclusion project attempts to tackle both the supply side and demand side
bottlenecks to financial inclusion. This will include Financial Education or financial literacy
activities at a national level, financial consumer protection awareness campaign, appropriate
regulatory responses to financial innovations and facilitating data collection to periodically
measure the levels of financial inclusion in Uganda.
The project will explore different ways of promoting increased financial services delivery channels and linkages between the formal and informal financial sector including providing an enabling regulatory framework for the Agent Banking model.
1.2. Status of financial Inclusion in Uganda
1.2 (a) Demand Side Data on Financial Inclusion
According to the 2009 FinScope survey2, the majority of Ugandans (75%) live in rural areas, 32%
do not earn any cash income, 8% are in formal employment, and 40% earn irregularly. On the
financial access strand, the survey showed that 70% of the sampled population aged 16 years
and above are financially served (formal and informal) while 30% are not served or are
1 Geo Spatial mapping of financial institutions cash in/cash out points carried out by M/S Bill and Melinda Gates Foundation. 2 The 2009 survey included respondents aged 16 years and above while the 2006 respondents comprised only those 18 years and above.
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financially excluded; 28% of the financially served use formal financial access (specifically 21%
used banking services)3 while the majority (42%) used informal financial services. The survey
concludes that Financial Inclusion is highly influenced by the informal sector.
Using the sample of 18 years and above the proportion of those using financial services
increased from 57% in 2006 to 72% in 2009. The comparison of the results for the 18+ years
sample is shown below:
Finscope Survey (2009) Financial Access Strand Results Comparison for the 18 and above
Sample
Access Strands/Year 2006 2009
Served by formal financial institutions (Banks, Credit Institutions, MDIs,
other formal registered institutions like MFIs, SACCOs, Insurance, NSSF,
Forex Bureau, Western Union, Money Gram, Mobile Money services)
28% 29%
Served by informal institutions: money lenders, ROSCAs, Village Savings
and Loan Associations (VSLAs), NGOs, investment clubs, savings clubs,
village groups like burial associations and welfare funds, savings like
through shops or investments in property (houses for rent), livestock’s, crop
produce to be sold later.
29% 43%
Not served formally or informally – Excluded 43% 28%
Source: Figure 3.4: Finscope Uganda 2009 Final Report. **The FinScope activities are a great support to the Bank of Uganda Financial Inclusion Project and are directly linked to Pillar 4 of the project: Financial Services Data and Measurement. The 2013 FinScope Survey is funded by DFID to a tune of USD 494,800 and is conducted by the Economic Policy Research Centre (EPRC).
1.2 (b) Supply Side Data on Financial Inclusion
The Bank of Uganda data on the licensed branches as at June, 2013, shows that the Commercial Banks network of branches reached a total of 504 compared to 496 in 2012 and 455 branches in 2011, while ATMs increased to 719 from 714 in 2012 and 637 in 2011. The Credit Institutions branch network increased from 44 in 2011, 42 in 2012 to 51 in June, 2013. The MDI network increased from 98 in 2011 to 99 in 2013 while the forex bureaus increased from 184 in 2011 to 205 in 2012 and to over 226 in June 2013. Mobile Money Financial services also showed rapid growth with the number of registered users reaching 12.1m in June, 2013 compared to 8.9m in December 2012. The cumulative value of money transferred through the mobile money system increased from Shs.11.7 trillion in December 2012 to Shs.15.9 trillion in June 2013.
3 Banking Services means Commercial Banks, Credit Institutions and MDIs regulated by BOU.
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2. Financial Inclusion Project
2.1 Rationale for BOU’s Engagement in Financial Inclusion
The pace of technological advancement has resulted into unprecedented proliferation of
financial innovations. Despite these developments, the rural areas in Uganda like many other
Sub-Saharan African countries remain unbanked, with limited financial services provided
mainly by the informal sector in a fragmented manner, unsafe environment and limited
linkages.
Promoting Financial Inclusion is one of the strategic objectives of Bank of Uganda in its revised
Strategic Plan 2012-2017. Bank of Uganda is therefore in the process of implementing various
initiatives to improve financial inclusion in Uganda as a response to financial innovations, gaps
in financial education, consumer protection issues, financial deepening issues as well as issues
of access and quality of financial services among others. The goal is to create an enabling
environment for financial inclusion activities.
This structure of the Financial Inclusion Project also aims to fulfil BOU’s commitment under the Maya Declaration. At the 2011 AFI Global Policy Forum held at Maya, Mexico, BOU committed to: “To develop and implement a Strategy for Financial Inclusion based on four Pillars by 2014. Pillar 1: Financial Literacy, Pillar 2: Financial Consumer Protection, Pillar 3: Financial Innovations and Pillar 4: Financial Services Data and Measurement”
2.2 Overview of the Financial Inclusion Project
Bank of Uganda’s financial inclusion activities have been set up as a Project under the
leadership of Supervision Function. The overall objective of the Project is to increase access to
financial services and empower the users of financial services to make rational decisions in their
personal finances so as to contribute to economic growth.
The project will run for an initial period of three (3) years (2012-2015) and relevant sub-
strategies are being developed and implemented during this period. The activities outlined in
this framework paper are based on the four identified Pillars:
Pillar 1: Financial Literacy (FL) The broad goal under this pillar is to ensure a more financially literate population, empowered and equipped to make prudent choices on their personal finances. The identified strands are: financial education in schools, use of media for financial literacy, rural outreach, the youth, workplaces, clubs & associations.
Pillar 2: Financial Consumer Protection (FCP)
The broad goal is to promote fair and equitable financial services, increase transparency,
foster confidence, enhance disclosures on bank products, provide mechanisms for
handling complaints and ensure privacy of consumer information.
Pillar 3: Financial Innovations (FI)
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The broad goal is to establish an effective regulatory framework for financial sector
innovations in order to further broaden financial inclusion while ensuring system
stability and safety.
The currently identified strands include; Agent Banking and Mobile Money Financial
Services, however the pillar remains open to accommodate other financial innovations
including Payment Systems.
Pillar 4: Financial Services Data and Measurement (DM)
The broad goal is to monitor and measure financial inclusion indicators of access, usage,
quality and welfare or impact of financial services on the lives of consumers. This
requires defining key financial inclusion indicators and developing strategy for
collection and utilisation of data as an integral part of the Financial Inclusion Project.
The identified Strands include; financial access indicators, usage of financial services
looking at both the demand the supply side, quality or the relevance of the financial
services or products and their impact on consumers.
Examples of the access measurement indicators include: the percentage of adult
population with bank accounts, number of bank branches per 1000 adults and number
of ATMS per 1000 adults, credit/GDP ratio, savings GDP ratio and spread between
deposits and lending rates.
2.3 The Bank of Uganda Financial Inclusion Internal Project Structure
Chair FL SC
Chair FCP SC
Chair FI SC
Chair FSDM SC
FL SCMembers
FCP SC Members
FI SCMembers
FSDM SCMembers
Project Manager
GIZDCB, D.Comm.,
Apex Comm.
EDS
CORPORATE LEVEL (EXCOM)
Source: Bank of Uganda The overall reporting is to the BOU Executive Committee (EXCOM). The directing role is vested
in the Executive Director Supervision in consultation with GIZ, the Project Apex Committee,
Director Commercial Banking, Director Communications and other Departments. The Project
Manager coordinates the day to day running of the project activities while the Sub-Committee
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Chairpersons are charged with the delivery of planned activities in consultation with external
stakeholders, who are drawn from the public and private sectors as well as the development
partners.
As part of the overall Financial Inclusion Project, the BOU has established four Sub-Committees
to spearhead initiatives in the identified areas. The Sub-Committees are drawn from relevant
Functions and Departments across BOU.
The activities of the four Sub-Committees are overseen by the Financial Inclusion Apex
Committee which is charged with leading the BOU’s efforts on Financial Inclusion, providing
effective governance and coordination for the FIP within BOU, monitoring progress and
reporting to BOU Management. The Apex Committee is constituted by the Project Manager,
the Chairpersons of the four Sub-Committees and GIZ.
2.4 Interaction with External Stakeholders
In implementing the Financial Inclusion Project, Bank of Uganda recognizes the efforts of the
different organizations that have been involved in promoting financial inclusion in Uganda
over many years. The FIP aims to build on these efforts in collaboration with a broad range of
stakeholders, as well as seeking to facilitate the engagement of additional players to advance
the overall goal of financial inclusion. Further details on the interaction with external
stakeholders are provided in Section 3.
3. Detailed Strategy Frameworks for the Financial Inclusion Pillars
3.1 Pillar 1: Financial Literacy
3.1.1 Background to Financial Literacy
Financial Literacy can be defined as having the knowledge, skills and confidence to manage
one's finances well, taking into account one's economic and social circumstances. Strengthening
people's financial literacy will enable them to make the most of their money, protect themselves
against risks and avoid financial frauds; and will enhance financial inclusion and inclusive
growth. Efforts to implement Financial Literacy (FL) and Financial Consumer Protection
(FLFCP) were initiated by BOU, with support of GIZ, in September 2009. During 2010, a
detailed analysis was conducted through a consultative process with a broad range of
stakeholders, culminating into a report4 titled: “An Effective Framework for Financial Literacy
and Financial Consumer Protection in Uganda”. In order to follow up on the recommendations
of the report, a Sub-Committee for Financial Literacy was established to coordinate BOU’s work
in spearheading the development of a Strategy on Financial Literacy in Uganda. Since then, the
Financial Literacy Sub-Committee has engaged more than 150 stakeholders in a structured,
consultative process to develop a Strategy on Financial Literacy for Uganda, based on the
principles of cost-effectiveness, sustainability and feasibility. The Strategy aims at making cost-
effective use of resources which can be used to strengthen financial literacy. Through the
Strategy, a number of initiatives to strengthen financial literacy are being promoted. The
4 The report was approved by BOU management in March 2011.
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Strategy facilitates effective coordination and knowledge-sharing between organisations and
individuals who are working to improve financial literacy. A broad range of stakeholders is
involved in implementing aspects of the Strategy. The role of Bank of Uganda is to spearhead
the implementation and further development of the Strategy.
3.1.2 Purpose of this Pillar
The broad goal under this pillar is to ensure a more financially literate population, empowered
and equipped to make prudent choices in their personal finances.
3.1.3 Specific Objective
The specific objective is to spearhead the development and implementation of a Strategy for
Financial Literacy in Uganda (SFLU) in partnership with a wide range of stakeholders. The
SFLU aims at cost-effective use of resources which can be used to strengthen financial literacy;
and effective coordination and knowledge-sharing between organisations and individuals who
are working to improve financial literacy.
3.1.4 Role of the BOU FLSC
The role of the FLSC is to coordinate Bank of Uganda’s efforts in spearheading the development
and implementation of the Strategy on Financial Literacy for Uganda.
3.1.5 Membership of the FLSC
The FLSC draws its membership from the following departments of Bank of Uganda:
Commercial Banking (CB), Non-Banking Financial Institutions (NBFI), Communications,
Financial Markets (FM) and GIZ.
3.1.6 External Partnerships
The preparation of the Strategy on Financial Literacy for Uganda has benefited from the input
of stakeholders during a series of stakeholder workshops and in a number of individual
meetings and discussions. In order to effectively coordinate the development and
implementation of the SFLU, Bank of Uganda has established the following advisory and
consultative bodies:
The Financial Literacy Advisory Group (FLAG), which is composed of high level
individuals who bring expertise from a variety of sectors relevant to the Strategy, and
whose role is to provide strategic advice to Bank of Uganda and the Working Groups.
The Financial Literacy Information Sharing Group (FLISG), an information sharing
forum open to everyone with a stake or an interest in Financial Literacy.
Five Working Groups – on Schools, Youth, Workplace, Rural outreach and the Media,
which comprise experts in the various areas. Each Working Group began by identifying
a wide range of possible financial literacy programmes and then developed
recommendations for the development and implementation of a small number of
programmes which are most likely to be cost-effective, affordable and feasible. Once the
Strategy has been launched, the Working Groups will oversee the implementation.
The continued engagement and efforts of stakeholders across a broad range of sectors will be
indispensable if the Strategy is to be successfully implemented and to achieve a genuine and
significant increase in the level of financial literacy in Uganda.
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3.1.7 FLSC Strategic Priorities
Bank of Uganda aims to achieve significant improvements in financial literacy across the
Ugandan population. For each of the five strands identified by stakeholders (FL in schools, FL
for the youth, FL via rural outreach, FL at the workplace and FL via the media), Bank of Uganda
has facilitated the Working Groups to develop cost-effective, sustainable and feasible priority
activities as described below:
Schools: The Strategy seeks to incorporate FL into the secondary school curriculum as
part of the overall reform of the curriculum, as well as into the primary school
curriculum through the development of supplementary materials and teachers’
trainings. At the same time, extra-curricular activities relating to FL shall be extended.
Youth: The Strategy proposes the incorporation of FL into university exit courses and the
training of community FL mentors who incorporate FL into the activities of already
existing youth clubs and associations.
Rural Outreach: The Strategy proposes the provision of FL trainings to rural
communities, capitalizing on existing trainings and trainers. Additionally, FL messages
shall be disseminated via a variety of community channels like community radios,
community meetings and many more.
Workplace: This will involve improving FL at formal workplaces through presentations
and trainings, as well as presentations being held to informal workers through their
associations.
Media: To achieve maximum outreach, a lively and vibrant website dedicated to FL will
be developed, newspapers and magazines will be engaged to increase their FL contents,
and radio as well as social media will be used as platforms to spread the messages.
3.1.8 Activity Timing and Expected Output for the Financial Literacy Sub Committee
Activity Timing 2012-15 Expected Output
2012-13 2013-14 2014-15 Identify candidates for the advisory and consultative bodies (FLAG, FLISG, 5 Working Groups)
√ Candidates for FLAG, FLISG WGs identified
Establish the advisory and consultative bodies (FLAG, FLISG, 5 Working Groups)
√ FLAG, FLISG, WGs established
Coordinate the development of core messages on FL which cut across all 5 strands
√ Core messages are developed and agreed on with the sector
Facilitate the Working Groups in developing cost-effective, sustainable and feasible priority activities
√ Cost-effective, sustainable and feasible priority activities developed for each strand
Harmonize the priority activities with FLAG and FLISG
√ Priority activities are agreed on with FLAG and FLISG
Draft the Strategy document √ Strategy document drafted
Publish and launch the Strategy on Financial Literacy for Uganda
√ SFLU published and launched
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Coordinate the development of resource materials for implementing the priority activities
√ Resource materials are developed
Coordinate the piloting and evaluation of priority activities under the 5 strands
√ Priority activities are being piloted
Spearhead the rolling out of priority activities
√ √ Strategy for Financial Literacy in Uganda is being implemented
Ensure effective knowledge sharing, stakeholder communication and coordination
√ √ √
Source: Bank of Uganda
3.2 Pillar 2: Financial Consumer Protection
3.2.1 Background to Financial Consumer Protection
Financial consumer protection seeks to level the playing field between suppliers and consumers
of financial services. Financial Consumers usually have less information about financial
products and services offered by financial institutions, which can result in excessively high
interest rates, poor understanding about financial options and insufficient avenues for redress.
Following the recommendations of the report “An Effective Framework for Financial Literacy
and Financial Consumer Protection in Uganda”, the Bank of Uganda developed Financial
Consumer Protection Guidelines (FCPGs) which were issued to supervised financial institutions
in June 2011. The Guidelines stipulated requirements on Fairness, Reliability, Transparency and
Complaints Handling & Consumer Recourse.
BOU also established the Regulators Technical Committee with other financial sector regulators
to discuss how to harmonise and strengthen consumer protection requirements across the
broader financial sector.
3.2.2 Purpose of this Pillar
The broad purpose of this pillar is to effectively implement financial consumer protection in
order to promote fair and equitable financial services; increase transparency, empower
consumers of financial services; and support the establishment of efficient and effective
mechanisms for handling consumer complaints relating to the provision of financial products
and services so as to foster consumer confidence in the financial sector with the ultimate goal of
encouraging financial deepening.
3.2.3 Specific Objective
The specific objective is to monitor effective implementation of the financial consumer
protection guidelines by supervised financial institutions (SFIs) and to recommend
improvements as well as to promote improved harmonization of financial consumer protection
issues across the broader financial sector.
3.2.4 Role of the BOU FCP SC
The main responsibilities of the FCP SC are to develop, implement and coordinate activities
relating to the implementation of the BOU FCP Guidelines.
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3.2.5 Membership of the FCP SC
The FCP SC draws its membership from the following Departments; Commercial Banking,
NBFI, GIZ and Communications and Legal (where necessary).
3.2.6 External Partnerships
BOU will interact closely with external partners including other regulatory authorities (CMA,
MOFPED, IRA, and UCC), apex bodies (e.g. UBA, AMFIU, UIA) as well as regulated financial
institutions. BOU will also continue to seek feedback and updates from interested third parties
and consumer associations.
3.2.7 Strategic Priorities
The Bank of Uganda has embarked on a three-pronged approach to delivering the project: This
includes: raising the awareness of consumers through a continuous programme to broadly
publicise the FCPGs so that consumers are aware of SFIs’ responsibilities as well as their own
responsibilities as clients; strengthening Bank of Uganda’s supervisory skills to ensure
compliance by the SFIs and working with SFIs to ensure there is a clear understanding of what
is required under the FCPGs
Through this approach it is intended that the outcome will be threefold: SFIs want to meet the
standards of the FCPGs, and have been educated to do so, because consumers are sufficiently
informed and empowered to know they have rights that should be fulfilled and that BOU, as
Regulator, is backing this up by monitoring that SFIs are attaining the standards required by the
FCPGs.
Major activities for the implementation of FCP Guidelines include:
Review progress with implementation of Guidelines and provide further orientation to
supervised financial institutions on outstanding issues
Develop and issue Key Facts Documents to enhance transparency in the sector and
thereby enable consumers to make informed financial decisions
Develop and implement measures to strengthen complaints handling both within SFIs
and within BOU
Strengthen BOU supervision of compliance with FCP requirements
Develop a communications strategy to effectively reach clients of supervised financial
institutions and the wider public to raise awareness on the FCPGs among consumers
(“know your rights”)
Review the FCP Guidelines periodically and update where appropriate
Major activities to strengthen harmonisation of FCP requirements across the broader financial
sector include:
Liaise with other regulators to identify areas of potential harmonisation of FCP
requirements and possible collaboration
Coordinate activities identified for collaboration
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Periodically engage stakeholders through workshops
3.2.8 Activity Timing and Expected Output for the FCP Sub Committee.
Activity Timing 2012-15 Expected Output
2012-13 2013-14 2014-15
Review status of implementation of FCP Guidelines
√ Gaps Identified
Support further implementation of FCP provisions
√ √ √ Enhancements issued
Establish FCP “Consultation Group” on FCP issues drawn from the relevant stakeholders (UBA, SFIs, SACCOS, MFIs, AMFIU)
√ Consultation Group established
Develop internal strategy on supervision of FCP principles
√ Internal guidance note on key FCP issues to review during on-site inspections
Develop Key Facts Document(s) (KFD) √ √
Key Facts Documents issued Circulate KFD to SFIs, and other relevant organizations for comments
√
Finalise and issue KFD √
Revive Regulators Technical Committee √ RTC operational
Develop and implement strategy to improve effectiveness of complaints handling
√ √ √ Efficient mechanism for complaints handling established
Develop and implement appropriate communication strategy to the public regarding FCP developments , including issuance of pamphlets in different local languages
√ √ √ The public is aware of their rights under the FCP Guidelines
Develop long-term supervisory procedures and BOU capacity
√ √ √ FCP integrated into supervisory practices of BOU
Review and update FCP Guidelines √ Updated FCP Guidelines Source: Bank of Uganda
3.3 Pillar 3: Financial Innovations
3.3.1 Background to the Financial Innovations
Against the background of technological innovations, the nature of financial services is evolving
rapidly. Service delivery in particular has been influenced by technological innovations in
recent years. The Bank of Uganda seeks to establish an effective regulatory framework for
financial sector innovations in order to further broaden financial inclusion while ensuring
system stability and safety.
This entails, considering in a holistic and comprehensive manner, the following: Agent Banking,
Point of Sale Services and Mobile Payment Services, Financial Service Innovations including
Branching Mechanisms. The first trigger on the need for a quick regulatory response was the
request by Mobile Network Operators (MNOs) to provide Mobile Money Services where BOU
responded by allowing banks to partner with MNOs to provide the services, which commenced
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in 2009. To this effect BOU initially issued ‘no objection’ letters to partner banks and
subsequently issued enhancements to the ‘no objection’ letters to mitigate the identified risks.
3.3.2 Purpose of this Pillar
The broad goal is to facilitate the positive development of financial system, institutional, process
and products/services innovations while ensuring safety and stability.
3.3.3 Specific Objective
The specific objective is to develop and operationalize a holistic approach to regulation and
supervision of new technologies for financial service delivery which facilitate Financial
Inclusion on a safe and sustainable basis.
3.3.4 Role of the BOU FISC
The role of the FISC is to coordinate and drive forward BOU’s activities in the sphere of financial sector innovations to provide adequate regulatory responses to financial innovations so as to keep pace with market responses to shortfalls in the financial systems and regulatory arbitrage tendencies.
3.3.5 Membership of the FISC
The FISC is drawn from CB, NBFI, PSD, GIZ, Legal and Communications on a consultation basis.
3.3.6 External Partnerships
BOU will interact closely with external partners including other external authorities including:
MOFPED, UCC, financial institutions, mobile network operators and other relevant actors from
the public and the private sector.
3.3.7 Strategic Priorities
Major activities on Mobile Money include:
Establish formal collaborative arrangements with UCC on the regulation and
supervision of Mobile Money.
Development of Guiding Principles on Mobile Money
Development of Mobile Money Guidelines
Provision of comments on the National Payment System Policy Paper
Provide inputs into relevant legal and regulatory changes as regards Mobile Money
Support the development of a long-term regulatory framework for mobile money in the
context of a comprehensive legal framework for payments (NPS Act)
Major activities on Agent Banking and Branching include:
Provide inputs into relevant legal and regulatory changes as regards Agent Banking
Development of Guiding Principles on Agent Banking and Branching
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Drafting of Agency Banking Regulations
Major activities on the Supervisory Framework include:
Develop and implement a holistic supervisory approach for financial innovations, in
collaboration with other regulators where appropriate
3.3.8 Activity Timing and Expected Output of the Financial Innovations Sub Committee
Activity Timing 2012-15 Expected Output
2012-
13 2013-
14 2014-
15
Mobile Money
1. Prepare recommendations for amendments to FIA (2004) relating to mobile money/mobile payments
√ Amendments submitted to Parliament by BOU and subsequently enacted.
2. Develop “Guiding Principles” for the regulation and supervision of Mobile Money to provide orientation for subsequent work.
√ “Guiding Principles” document.
3. Development of Mobile Money Guidelines.
√ √ Mobile Money Guidelines issued to the sector.
4. Make recommendations on interim changes to current arrangements
√ √ √ Recommendations responding to pertinent developments (e.g. further modifications to ‘no objection’ letters)
5. Input to National Payment Systems (NPS) Law.
√ Recommendations on areas relating to mobile payments to ensure the processes are coordinated.
6. Development of a long-term regulatory framework for mobile money in the context of a comprehensive legal framework for payments. (NPS Law)
√ √ Regulations on Mobile Payments under a NPS Law
7. Establish formal collaborative arrangements with UCC on the regulation and supervision of Mobile Money.
√ √ Establish Joint Working (JWG) Group, agree on ToR, identify areas of collaboration and enter into MoU.
8. Implement agreements within MoU in collaboration with UCC.
√ √ √ Contingent upon final content of MoU.
Agent Banking and Branching
1. Prepare amendments to FIA (2004) and MDIA (2003) to enable Agent Banking
√ Amendments submitted to Parliament and subsequently enacted
2. Develop “Guiding Principles” on Agent Banking and Branching to provide orientation for subsequent work.
√ “Guiding Principles” document.
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Activity Timing 2012-15 Expected Output
3. Development of Agent Banking Regulations
√ Agent Banking and Branching Regulations submitted to 1st Parl. Counsel and subsequently gazetted
4. Develop recommendations for risk-based supervision of Agent Banking
√ Supervisory recommendations developed
5. Implement risk-based supervisory regime for Agent Banking, including further development of BOU-internal capacity and expertise
√ √ Effective supervision implemented
Source: Bank of Uganda
3.4 Pillar 4: Financial Services Data and Measurement (FSDM)
3.4.1 Background to the Financial Services Data and Measurement
The Financial Services Data and Measurement(FSDM) component of the Financial Inclusion Project (FIP) is designed to determine the adequacy of data on the various strands of the overall FIP, identifying the most suitable measurement tools to facilitate measurement and monitoring of indicators of access, usage and quality of financial services. Data plays an important role in determining the state of financial inclusion, influencing stakeholder actions and assessing progress.
3.4.2 Purpose of this Pillar
The main purpose of this pillar is to enhance the framework for financial services data and measurement and provide a mechanism for monitoring and measuring financial inclusion indicators of access, usage, quality and welfare on the lives of consumers in Uganda.
3.4.3 Specific Objectives
The specific objective is to develop benchmarks for measuring and monitoring Financial Inclusion.
3.4.4 Role of the BOU FSDM SC
The role of the FSDM Sub-Committee is to lead Bank of Uganda’s efforts in the collection and analysis of Financial Inclusion Data to evaluate the overall impact of the Financial Inclusion activities on the level of access and financial exclusion.
3.4.5 Membership of the FSDM SC
The FSDM Sub-Committee is drawn from Research, Statistics, CB, NBFI, FM, Financial Stability (FS) and PSD on a consultation basis.
3.4.6 External Partnerships
Throughout the tenor of the project, the sub-commitee shall build on collaboration and coordination efforts already in place. External partners include: IRA, UCSCU, AMFIU, DFID, AFI, SFIs, National Social Security Fund and Government Ministries and Departments.
3.4.7 Strategic Priorities
Major activities on Financial Services Data and Measurement are to:
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Formulate a contextually relevant definition of financial inclusion.
Identify the relevant key financial inclusion indicators of access, usage, quality and welfare.
Take stock of current available data both on the supply and demand side and assess the
adequacy of the data for development of a financial inclusion data set.
Devise strategy for collection and utilisation of data as an integral part of the Financial
Inclusion Strategy.
Adopt relevant measurable indicators for the Financial Inclusion Data set.
Monitor and evaluate Financial Inclusion indicators of Access, usage, Quality and Welfare
or Impact of financial services on the lives of consumers.
Establish internal and external coordination structures with relevant partners/stakeholders
(internally Research Function, Supervision Function and Financial Markets Department
(FMD) and externally with institutions like GIZ, UBOS, and CMA.
Participate in ongoing initiatives like the 3rd FinScope survey, AFI data working group to
inform overall Financial Inclusion Strategic Framework.
Together with other sub committees, identify benchmarks against which success or failure
of the financial inclusion strategy can be measured.
Develop an Action plan and road map for achieving the main goals of the data and
measurement subcommittee.
Publication of the Financial Inclusion Report on the level of access and financial exclusion in
Uganda.
3.4.8 Activity Timing and Expected Output for the FSDM Sub Committee
Activity
Timing 2012-15 Expected Output
2012-13 2013-14 2014-15
Revisit the definition of Financial Inclusion for Uganda and benchmark with other countries
√ √ Agreed upon definition of financial inclusion for Uganda
Revisit the financial inclusion strands of Access, Usage, Quality, and welfare to ensure that they are measureable
√
√
Agreed upon strands of financial inclusion
Engage the different departments within the BOU to identify list of relevant data for financial inclusion measurement that are already compiled
√
√
Data status report
Enhance questions in the FinScope survey to measure Financial Inclusion
√
Proposed list of questions for inclusion in FinScope survey questionnaire
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Activity
Timing 2012-15 Expected Output
Develop form for collecting additional supply side indicators from Financial Institutions
√ √ Financial Inclusion Data collection Form
Finalize the Geo Spatial Mapping of Financial Services points and Develop Financial Services Access Grid for Uganda
√ √ Financial Services Access Map for Uganda
Carry out impact evaluation of financial inclusion activities on access to financial services
√ Impact evaluation report on the level of access and financial exclusion in Uganda
Coordinate FinScope Secretariat as per Terms of Reference
√ √ Minutes/ Resolutions of the Steering Committee
Develop Financial Inclusion Data Report
√ Financial Inclusion Data Report
Participate in AFI Data Working Group(FIDWG) meetings
√ √ √ Deliverables as agreed by FIDWG.
Source: Bank of Uganda
4. References 1. Centre for Financial Inclusion at Accion (CFI) (2011), Road Map for the Microfinance industry:
Focussing on Responsible and Client Centred Microfinance. The Microfinance CEO Working Group.
2. Finscope Uganda 2009, Final Report: Results of a National Survey on demand, Usage and Access to Financial services in Uganda
3. Bank of Uganda and GIZ: Towards an Effective Framework for Financial Literacy and Financial Consumer Protection in Uganda
4. The 2011 AFI Global Policy Forum Report: Taking stock, setting goals, Moving forward 5. Asli Demirguc-Kunt et al (2012), Financial Inclusion in Africa: An Overview. Washington. World
Bank Publications. 6. Bill & Melinda Gates foundation (March, 2013): Geospatial Mapping for Financial Inclusion 7. Bank of Uganda: Annual Supervision Report December 2012 Issue No.3