KAMPALA–The State Minister of Trade, Industry and Cooperatives, Michael Werikhe has hinted that the so much talked about Middle income status is in doubt, citing financial exclusion as reason.
Speaking at a financial inclusion symposium organised by Financial Sector Deepening Uganda (FSDU) at Serena Hotel, Werikhe said one of the biggest challenges to the middle income status is that many Ugandans don’t have access to financial services. He revealed that according to a recent study, 80% of Ugandans don’t have bank accounts.
“With these kinds of statistics, our strides to achieve a middle income status are threatened… because it is globally acknowledged that financial inclusion is a fundamental ingredient of inclusive growth and development. The other challenge is, the complex and lending procedures in accessing formal loan services. The unscrupulous money lenders who operate informally and are ready with quick money but charge exorbitant interests and sometimes deliberately target properties of unsuspecting borrowers.”
He was, however, hopeful that the just introduced financial institutions amendment bill 2015 that “introduced new products; Islamic banking, Bancassurance and Agent Banking will go a long way towards supporting financial inclusion since they will reduce on interest.” He also lauded FSDU for complimenting government in extending access to financial services to Ugandans.
Speaking at the event, the Executive Director of FSDU, Jacqueline Muna Musiitwa revealed that her organisation has so far it has extended at a financial services to 400,000 Ugandans who were initially excluded.
“I can proudly say that with generous support from the UK government, through the Department for International Development, FSDU has become a key facilitator and leader in the effort to make the financial services sector work for all Ugandans. Since its establishment as a company in 2015, FSDU has continued to grow and innovate to best serve Uganda and as such has built up capacity to bring about change in the way of doing business. We don’t do this alone. Through our partners, we’ve impacted the lives of over 400,000 men and women who were previously excluded individuals by giving them access to a suitable and affordable formal financial services product,” she revealed to the guests that included several top officials from various Bank’s and financial institutions including the State Minister of Trade, Cooperatives and Microfinance.
She further added that FSDU has managed to support innovation for over 2,500 micro and small to medium enterprises through alternative credit scoring, microfinance solutions and better record keeping and financial management practices.
“These are businesses fighting not only to survive but to thrive and through our support, now have a chance at improving their livelihoods. But beyond the numbers, our goal is in collaboration and partnership to make the financial markets work for the poor. For too long, the bulk of Uganda’s population has depended on the good will of others.
“But we believe that there’s not only unbelievable potential in the entrepreneurial spirit of the people in the Pearl of Africa but there is a sound business reason to tap this potential, not tomorrow but today. The latest Fin scope study, a financial services landscape survey pioneered by FSDU and used by several public and private institutions, shows that only one in every five adults (representing 3.3 million adults) had a formal account of some nature in formal banks or nonbank formal intuitions. We must do better. The FII tracker from the Gates Foundation shows that 6 in 10 Ugandans are financially excluded. This means they have no access to formal or non-bank financial services. As we prepare to carry out the next Fin scope survey, we expect this number to have improved, but work remains to be done. We must do better. We will do better.”
“The challenge before us is not an easy one, but together, through sound design, innovative risk taking and efficient government policy, I believe that we can get there. FSDU is here to provide the support that you as regulators, policy makers and private sector financial service providers may require in maximizing not only your own potential but that of all Ugandans.”