By the Governor of the Bank of Uganda, at the National Microfinance Conference 2015 “Financial Inclusion in a Regulated Environment in the East African Community”, Kampala, 29 January 2015.
Good morning, ladies and gentlemen, My intention this morning is to outline the regulatory approach which we have adopted in Uganda with regard to the promotion of financial inclusion and then to discuss the results of that approach. I will start by expounding the principles which guide the regulatory approach. The key principle which guides our regulatory approach to the promotion of financial inclusion is that financial regulations cannot force financial institutions to provide customers with financial services when this is not profitable for them to do so. The main cause of financial exclusion is the difficulty in serving the financially excluded in a commercially viable manner. These difficulties arise because the costs of serving the financially excluded are high, especially in rural areas, whereas the income which can be generated from the poor is low. Consequently financial exclusion can only be reduced through innovations which can lower the cost of providing financial services or which can create new financial services which are both wanted by and affordable to the poor.
Conclusion Uganda has made some progress towards greater financial inclusion over the last 10 years. The most important contribution has been made by the rapid spread of mobile banking, although the range of services offered is still quite narrow. However, commercial banks should be able to harness new technologies, especially through the use of smart phones, to provide a wider range of services through mobile banking in the future. We also hope that the graduation of some of the larger SACCOs into Microfinance Deposit Taking Institutions and the adoption of agent banking by the commercial banks will also boost financial inclusion. The priority objective of financial regulation will continue to be ensuring the safety of customers’ deposits.