Uganda: New Report Cautions Banks on Agent Banking

Apr 2017
Uganda, April, 24 2017 - A new market report has revealed the opportunities that lie within agent banking but at the same time cautioned banks on the challenges of the model.

The demand and supply side survey report for agency banking, which was launched at Kampala Serena Hotel last week, was produced by Financial Sector Deepening Uganda (FSDU) in partnership with Microsave.

It gave an industry insight to enable the different sector players plan for the new wave of interventions that will enable them make money but also increase financial services across the country.

Mr David Cracknell, the global technical director Microsave - an international financial inclusion consulting firm, said banking systems in Uganda are highly concentrated in urban areas and as such not spread out to some parts of the country which makes agent banking a means to an end.

However, he warned that it should not be very expensive for the people to use because it will discourage them from using the service.

"If you do not make it easier with Agency banking, it will fail. For the model to become successful, you need to have many people on the platform-costs will be much lower," he said.

He added: "The higher the number of people using the service, the lower the costs involved and the lower the number of people using the service the higher the cost of service which hampers growth of Agency banking."

The study also shows that almost 80 per cent of the potential market is in rural areas and as such costs will play a great role in determining the success of this model.

The study brought out a number of things which the banks need to be able to think about. One of the issues that were clearly highlighted was fraud.

"Banks need to have proper risk mitigating measures to be able to rid the side of fraud," the report says.

Ms Christine Alupo, the director communications at Bank of Uganda, said there is demand and readiness for agency banking from potential consumers and agents, adding that the draft regulations have already been concluded and a draft has already been sent to the Minister of finance to the first parliamentary council.

Mr Wilbrod Owor, the executive director Uganda Bankers Association, said through agent banking, banks will extend their services to remote areas to increase access, address cash/float challenges and provide a range of products and services to bring the informal sector outside the financial system onto the formal financial system where monetary policy and targeted interventions can be directed.

Source : allAfrica

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