AN APPRAISAL OF THE ADEQUECY OF ELECTRONIC BANKING LAWS ON

CONSUMER PROTECTION IN UGANDA

A RESEARCH PROPOSAL SUBMITTED TO THE SCHOOL OF LAW IN

PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE
AWARD OF A BACHELORS OF LAWS OF KAMPALA
INTERNATIONAL UNIVERSITY

FEBRUARY, 2024

i
 BIBLIOGRAPHY
Textbooks
Essays in Banking Law and Practice by Professor G.P Tumwine Mukubwa
Banking and Practice by the Institute of Company Secretaries in India
Modern Banking by Shelagh Heffernan.
**We shall also rely on additional textbooks along the research, this list
will be updated accordingly.

Statutes & Regulations

Bills of Exchange Act Cap 68
The Bank of Uganda Consumer Protection Guidelines, 2011.
The Anti-Money Money Laundering Act, 2013
The Anti-Money Money Laundering (Amendment) Act, 2017
The Anti-Money Laundering Regulations 2013
Electronic transactions Act No.8 of 2011
Electronic Signatures Act No. 7 of 2011
The Contracts Act No. 7 of 2010
The Financial Institutions Act No.2 of 2004 (as amended by the Tier 4
Microfinance Institutions and Money Lenders Act, 2016)
The Financial Institutions Act, 2004 (as amended)
The Foreign Exchange Act, 2004
The Bank of Uganda Act, Cap 51
The Electronic Money Regulations, 2011 (UK)
Kenya E-Money Regulations, 2013
The Tier 4 Microfinance Institutions and Money Lenders Act, 2016
The Micro Finance Deposit-Taking Institutions Act No. 5 of 2003, (as amended
by the Tier 4 Microfinance Institutions and Money Lenders Act, 2016)
The Uganda Communications Act, 2013
The Companies Act, 2012

i
Journal & Media Articles
1. A Legal Overview of Electronic Banking in Uganda accessible via
https://ir.iuiu.ac.ug/bitstream/handle/20.500.12309/716/A%20Legal
%20Overview%20of%20Electronic%20Banking%20in%20Uganda.pdf?
sequence=1

2. PWC; Retail Banking 2020: Evolution or revolution? Accessed via

https://www.pwc.com/gx/en/banking-capital-markets/banking-2020/
assets/pwc-retail-banking-2020-evolution-or-revolution.pdf

3. Kate stalter, The future of Banking, US News, June 25, 2015.

https://news.yahoo.com/future-banking-130000438.html?
guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&g
uce_referrer_sig=AQAAAA5G6ZeFovFH4AHKnxD6TAYqmRp53aIl0PHnCs
NbJp6Us0O_kgeIMXQMiXryJkU8C4kxKLjYS8E0uH-
88xrMyCaWHiH_tTjE-DR-
HqE708gIZQWVlD_wrJdZzIt9uR109fjjvBgrbGGLSE_N0fq1PvSjys4fQcGD
yjQTPqpj1PL6

4. Introducing the New age Banking with Stanbic Bank on the go; A first in
Uganda, New Vision, Thursday October 8, 2015.

5. Analysis of the Adoption of Digital Banking Services: A Case Study of

Stanbic Bank Uganda by A. Namugenyi (2023).

6. Evolution of the Branchless Banking Model in Uganda: Evidence from

Equity Bank by M. Namagembe (2023).

7. A study titled Factors Affecting the Integration of Financial Technology

(FinTech) Solutions in the Operations of Microfinance Institutions in

ii
 Uganda: A Case Study of Vision Fund Uganda Limited by H. Nalweyiso
(2023).

8. A Logical Framework for Enhancing Integration of Mobile Money Service

Providers at MTN Mobile Money, Airtel Money in Uganda by M.J. Willy.

** Other articles will also be relied on from time to time, we shall

update this list at the end of the research.
List of cases
**1

1
** The list of cases will be updated as we carry on the research, we intend to rely on a wealth
of decisions, a list of which will be available at the end of the research.

iii
ABBRIEVIATIONS
B.O.U: Bank of Uganda
U.B.A: Uganda Bankers Association.
F.I.A: The Financial Institutions Act
U.B.I: Uganda Banking Institution

iv
 CHAPTER ONE
1. GENERAL INTRODUCTION
1.1 Background to the study
This research aims to meticulously examine the effectiveness of electronic
banking laws in safeguarding consumer interests in Uganda. It encompasses a
comprehensive introduction, encompassing the study's background, problem
statement, objectives, and research questions. The significance of the study, a
review of related literature, the scope, methodology, research questions, and
limitations are also systematically addressed. A synopsis of the chaptalization
is also explored.

The study will chronologically cover international payments and settlements in

chapter II, global aspects that impact electronic banking in Uganda under
chapter III, Chapter IV will together with chapter V delve into the legal
framework & consumer protection in E-banking space in Uganda. The final two
chapters (VI, VII) deal with adequacy of electronic banking laws on consumer
protection & recommendations comprehensively.

Uganda’s financial system is composed of formal, semiformal and informal

institutions however this research will specifically dwell on banks and the
electronic payment systems in Uganda. In the volatile field of electronic
banking, the key players are the customers and the banker; also, payment
systems service providers find themselves in this space.

Akin to myriad of other beings, a banker is easier to recognize than to define2.

Any company licensed to carry on financial institution business as its principal
business as specified in 2nd schedule to the Act, including all branches and
offices of that company in Uganda3. On the other hand, a body of persons

2
United Dominions Trust Ltd v. Kirkwood (1966) 2Q.B 431
3
The Financial Institutions Act 2004 as amended, S.3 (c) thereof.
whether incorporated or not who carry on the business of banking constitute of
a banker.4

Financial institution refers to a company licensed to carry on or conduct

financial institutions business in Uganda and includes a commercial bank,
merchant bank, mortgage bank, post office savings bank, credit institution, a
building society, an acceptance house, a discount house, a finance house or
any institution which by regulations is classified as a financial institution by
the Central Bank.

The Supreme Court of Uganda in Esso Petroleum Co. v. Uganda Commercial

Bank5 observed that the nature of the relationship of a Banker-customer-
consumer is created by a contract and there are certain duties /obligations
that accrue to all parties. A string of authorities has since followed suit to
amplify this position.

Electronic banking has several definitions, also known as electronic funds

transfer (EFT), is the use of electronic means to transfer funds directly from
one account to another, rather than by cheque or cash6.

E-banking as the provision of retail and small value banking products and
services through electronic channels. Such products and services can include
deposit-taking, lending, account management, the provision of financial advice,
electronic bill payment, and the provision of other electronic payment products
and services such as electronic money7.

4
Bill of Exchange Act, Cap 65 S.1
5
Civil Appeal No. 14 of 1992
6
Federal commission for consumers: electronic banking
7
Basle committee on banking supervision
Electronic Banking in Uganda was introduced in 1997 8 and developed to cater
for most of Ugandans with banking solutions that are affordable and
convenient for the bankers. Until then, there was meagre nor electronic
banking in Uganda—the financial institutions in Uganda adopted the various
electronic banking means.
Its factual that before this groundbreaking technological advancement, the
traditional banking customers had to physically visit the bank premises to
perform banking activities such as account inquiries, transfer of funds cash
withdrawal and other services.
E-banking has since enabled Ugandans do more with their monies though
studies have shown that the banking class has adopted this system at a rate of
just 39%9.

E-banking exists in a variety of forms, which can be divided into various

groups: consumer electronic banking, cooperate electronic banking, interbank
electronic banking product and plastic card10. Consumer Electronic banking
includes Automated Teller Machine (ATM), EFTPOS, Mobile Banking, internet
Banking, and Home/Office Banking.11 Corporate E-banking and interbank E-
Banking are additional examples. We shall focus on consumer electronic
banking laws and their adequacy in consumer protection.

The digital banking landscape is very slippery—potentially exposing everyone

involved at risks of fraud, data breaches, unauthorized transactions, snail-
paced dispute resolution among other. While digital banking has always
symbolised convenience, it is not without risks of fraud. As digital channels
have multiplied, so have the routes that fraudsters can use. With increased
automation financial institutions have become some of the most targeted by

8
B. M. Magaji; A Legal Overview of Electronic Banking in Uganda
9
Ibid
10
Ibid P. 32.
11
Ibid
fraudsters, due to their immediate access to funds and their ability to transfer
them12.

This called for the enactment of various laws and regulations to harmonize and
control the problems that were being raised by consumers as a result of the
electronic banking transactions in Uganda.

To mention but a few, The Bills of Exchange Act 13, The Anti-Money Money
Laundering Act14, Electronic transactions Act15, The Financial Institutions Act,
2004 (as amended)16, The Foreign Exchange Act17, The Bank of Uganda Act18,
the Companies Act, 2012, the bank of Uganda consumer protection
guidelines,2011 and many others all embedded with various provisions
protection consumers.

Inconclusion therefore, the laws as seen above are applicable in Uganda and
cater for the protection of consumers.

1.2 Statement of the problem

Ideally, electronic banking laws in Uganda would offer comprehensive
protection to consumers, safeguarding their rights, privacy, and fraudsters.
These laws would ensure transparent, fair, and equitable banking practices,
enabling consumers to engage confidently and securely in electronic
transactions. The legal framework would be robust, up-to-date, and responsive
to the evolving digital banking landscape, providing consumers with the
necessary legal recourse in cases of fraud, errors, or disputes.

12
Stephen Mubiru J in
13
Cap 68
14
Act 12 of 2013 as amended.
15
No.8 of 2011 Atiku v Centenary Rural Development Bank Limited (Civil Suit 754 of 2020)
[2022] UGCommC 146 (18 July 2022)
16
Act 2 of 2004 as amended.
17
Act 5 of 2004
18
Cap 51
However, a cursory dissection of the current state of electronic banking laws in
Uganda reveals significant inadequacies in effectively protecting consumers.
Despite the rapid adoption of electronic banking services, the legal framework
has not kept lightening pace with technological advancements. Consumers
frequently encounter challenges such as unauthorized transactions, privacy
breaches, fraud, and limited access to dispute resolution mechanisms. The
existing laws do not fully address the complexities of electronic banking,
leaving consumers vulnerable to exploitation and financial loss as of 2024.

The gap between the ideal and actual situations indicates a critical deficiency
in Uganda's electronic banking legal framework regarding consumer protection.
This discrepancy points to the need for comprehensive research to evaluate the
existing laws, identify their shortcomings, and propose necessary amendments
or new legislation. The study aims to bridge this gap by offering evidence-based
recommendations to enhance the legal protections for electronic banking
consumers in Uganda, ensuring their rights are adequately safeguarded
in the digital age.

1.4 Objectives of the study

General Objective
To analyze whether the electronic banking laws are adequate to protect
consumers in Uganda.

1.5 Specific Objectives

To examine the non-legal challenges affecting the adequacy of electronic
banking laws in Uganda.
To examine the role of state agencies in Uganda towards the protection of
consumers as stipulated by the electronic banking laws.
To suggest solutions and recommendations to fill the existing gaps in the
protection of consumers by electronic banking laws in Uganda.
1.3 Research questions.
To what extent are the current legal and regulatory frameworks governing
electronic banking in Uganda adequate for consumer protection, and what are
their key components and effectiveness in addressing common risks and
challenges faced by consumers?

What non-legal challenges affect the implementation of electronic banking laws

for consumer protection in Uganda, and what roles do various state agencies
play in enforcing these laws and safeguarding consumer rights?

How aware are Ugandan consumers of their rights within electronic banking,
what factors influence this awareness, and how does the adequacy or
inadequacy of electronic banking laws impact their confidence and trust in
the banking sector?

Considering the resources and capabilities of Uganda, what improvements or

amendments can be proposed to strengthen the existing legal framework for
electronic banking to ensure better consumer protection?

1.6 Significance of the study

The research will enhance consumer protection. This research identifies and
address gaps in Uganda's electronic banking laws; ensuring consumers are
safeguarded against fraud, privacy breaches, and unauthorized transactions,
thereby directly benefiting their security and rights in digital
financial transactions.

Furthermore, it will foster technological advancement. Through valuating and

suggesting improvements for the legal framework, the study supports the
adaptation of laws to new banking technologies, promoting innovation and the
development of secure electronic banking services that align with
global standards.

Building the already shrinking consumer confidence. Consumer confidence

being at the central nervous system of a working and purposeful banking
system, this research demonstrates how strengthened laws can enhance trust
in the electronic banking sector, encouraging wider adoption of digital banking
services by providing a more secure and reliable banking
environment for consumers.

By offering evidence-based recommendations for policymakers and regulators

to refine and enhance electronic banking legislation, this research is crucial in
guiding the trajectory of policy and regulators—guiding the creation of more
effective consumer protection measures and regulatory standards.

1.8 Research methodology

The researchers will focus on documentary review, by gathering and reviewing
existing legal documents, regulations, and guidelines related to electronic
banking in Uganda. Including but not limited to government reports, Acts of
Parliament, case law (both local and international), legal texts, and
policy documents.

This method will enable the researchers understand the current legal
framework governing electronic banking and identify stated
protections for consumers. Against this background, the researchers will be in
position to answer the research questions raised and give viable
recommendations.

1.9 Scope of the study

The study will cover all facts relating to the law on the use and implementation
of electronic banking laws in central Uganda to weigh on its adequacy to the
general public

1.9.1 Time Scope

It will be conducted within a time period of two months (February—March
2024).

1.9.2 Geographical Scope

The study shall be conducted in Uganda.

1. 9.3 Content Scope

The research will mainly focus on the extent to which consumers are protected
by electronic banking laws in Uganda.

1.10 Limitations of the study

Despite the fact that this study shall come up with intended results, there are
a number of challenges that the researchers are likely to encounter while
carrying on this study.

The researchers are limited by time as it may not be possible for them to
comprehensively study all the materials available on electronic banking within
two (02) months.
1.11 Literature Review
The researchers will zero-down a range of written and published scholarly
writings that cover the legal framework of electronic banking, consumer
protection laws, comparative studies from other jurisdictions, and any
scholarly debates on the effectiveness of such laws in consumer protection.
Researchers will, with focus, undress scholarly work on theoretical
Frameworks on Consumer Protection, Electronic Banking Laws and
Regulations in Uganda, Consumer Awareness and Behavior in
Electronic Banking, Challenges and Gaps in Existing Legislation etc. A
detailed literature review will guide the next chapters.

1.12 Chaptalization/ Organizational Layout

This research is divided into seven (07) chapters;
Chapter I introduces the research topic, breaking down its scope and the whole
course to be adopted throughout the study
Chapter II deals with international payments & settlements
Chapter III concerns itself with the Global Aspects that impact banking in
Uganda.
Chapter IV focuses on the legal framework for E-Banking in Uganda
Chapter V deals with Consumer protection in E-banking space in Uganda
Chapter VI analyses the adequacy of E-Banking on consumer protection in
Uganda
Chapter VII gives recommendations and conclusions