BANKING INFORMATION CONCEPT

Banking sector in Uganda

Uganda’s banking sector as of 1st February, 2017 was comprised of 24 banks. As of 21sth
December, 2015, total banking assents in the country were UGX 21.7 trillion ($6B)

In Uganda financial services are less prominent in rural areas than urban areas and they only
reach 14% of the rural population. Some districts in the country are not served by any
commercial banks. On average 62% of Uganda’s population has no access to financial services.
Slightly over 10 % of the population in Uganda has a personal savings account.

Motivation of the concept

Over the years, there has been a lot of mistrust between the banking industry and their clients.
This, being the strongest reason for the very low bank deposits and limited credit in our
economy, in addition to inaccessibility of some groups of people both within and outside the
formal sector of the economy. Loans accessibility has been restricted to certain key players in the
economy leaving out others who also need financing.

I this case, the telecom industry through its mobile money system has been able to use this
loophole to their advantage to tap into both the banked and unbanked population, leading to
exponential growth of mobile finance which now leads in local currency transfer estimated to be
44 trillion shillings from 21.6 million accounts and 132,937 agents across the country in 2016
according to the daily monitor of 28th March, 2017 from 21.6. They have now partnered with
other banks to give micro loans, a service that was initially a sole responsibility of the
commercial banks and Microfinance Institutions (MDIs).

The main aim of this initiative is to recreate a strong and lasting relationship between banks and
the bankable population so as to stimulate economic growth through business and asset financing
on top of saving and deposit taking. This will be achieved by bridging the information gap
between clients and banks. We wish to work towards research and development on behalf of the
banking sector to enable it gain stronger liquidity.
The bank of Uganda has tried to come up with a policy of Know your client (KYC), where a
bank customer is supposed to avail all possible and relevant information about them when
opening up an account. We have come up to try and bridge the information gap between the
clients and the banks, identify the gaps and quicken the process of establishing the credibility of
borrowers, an endeavour we believe will even reduce on the amount of nonperforming loans, that
are causing un expected shocks in the banking sector.

Commercial banks have in various ways been reluctant to engage the small business community
(who are the majority), spread all-over the country, mainly focusing on large scale
manufacturers, thereby missing out on potentially good borrowers in need of financial assistance,
left at the mercy of the mushrooming licensed and unlicensed money lenders who charge high
interest rates.

This group of business people has a lot financial needs that through engaging them can make
banks create new market based financial products tailored to the needs of this section of traders
and corporate.

This concept therefore, seeks to engage customers in all corners of the economy, on behalf of the
banking sector, to bridge the information gap between the banks and their clients (new and old).
In doing so, we shall be able to identify financing needs in the business community and refer
such needs to our partner banks. If banks are able to rely on the information we provide by
tasking us (the mediator) to do a thorough background check on the clients, they will be able to
advance loans to the recommended clients. Our work though does not stop at that, we go ahead
to do business and financial management training to these clients while doing a follow-up on the
advanced loans and give performance feed back to the bank (business monitoring).

Working hand in hand with the bank sales team, we shall be able to create new clients and new
markets that may have been untapped into and left to the hands of mobile finance, as reports say
over 50% of Uganda’s bankable population has been untapped into, hence banks losing out on a
lot of deposits needed to finance economic activities.

Potential of the concept

In this concept, we shall categories the clients according to their income and needs. In the district
of Butaleja for example, the main commercial activities are rice farming (Doho rice scheme) and
retail trade, a lot of potential lies in these activities for the these rural people. Doho rice scheme
has an operating Sacco for the farmers to save and take loans to finance production and value
addition, on top of that, there are so many Village Savings and Loans Associations (VSLAs)
spread across the different sub counties doing annual savings and keeping their savings hidden
somewhere in the treasurer’s home because the entire district does not have even a microfinance
institution operating their., these to me are great sources deposits and groups of potential
borrowers untapped into by the banks. This is a small section of the larger group spread all over
the country.

Role of the bank

I have a friend who works in one of the top banks in the country who openly admitted that their
bank is not a risk taker, they only finance those areas they can have strict control over. Albeit the
banks have a role to safeguard people and organizational deposits and funds, they are also
entrusted to create credit and allow monetary expansion in an economy supported by
productivity as they also make a profit out of it.

INVESTMENT OPPORTUNITY

I believe every organization strives to be a leader in possession of market information, we are

here to provide innovative and supportive sector information through on ground search,
feasibility studies, recommendation on credit worthy customers and carryout financial literacy
training on behalf of the bank.