Uganda-Bank Services - More than 10 million Ugandans have never sought or got any financial services, a recent study reveals. The revelation portrays the government's Bonnabagagawale programme in bad light, as those who have benefitted from the programme have turned out to be bad ambassadors despite the government's mission to help the average Ugandan earn Shs20 million a year. A Finscope study reveals that a record 30 per cent of adult Ugandans have never accessed any financial services from either a bank, microfinance institution, Savings and Credit Cooperative savingsor informal lenders. Some of the reasons for the phenomenon are the high interest rates, which have been made worse by the double digit inflation, driven by among others, the high dollar rate, fuel and food prices.
Dr Louis Kasekende who was giving a keynote address during the annual conference of the Association of Microfinance Institutions (AMFIU) also said, only 26 per cent of the adult population above the age 16 years have ever used the formal banking sector like commercial banks, credit institutions and microfinance deposit taking institutions (MDIs).
He added that more Ugandans opt for informal credit institutions or individual lenders for their financial needs because they are accessible, while, 30 per cent, don't even dare to seek any financial help from anyone or any institutions.
The study done in 2009 also opens a lead on where Ugandans commonly get their credit, namely, shops (54 per cent), friends (26 per cent), and informal sector (24 per cent).
Only 7% of Ugandans borrow from commercial banks while 3% and 2% respectively borrow from MDIs and Saccos respectively.
One of the biggest obstacle to accessing credit in Uganda are high interest rates, and a lot of red tape as in the requirements for taking a loan whereby many Ugandans have fallen victim to loan sharks that have taken away everything they owned while others have been thrown into jail for failing to pay loans, casting doubt on the need for credit if they only cause indebtedness.
Dr Kasekende whose presentation was an eye opener to the hundreds of microfinance dispensers from across the country also pointed out the need to embrace new technologies in the banking sector, saying, in recent years, the telecom industry has won over more people into the banking by making saving money more accessible and easier.
Bank of Uganda has licensed three telecom companies, MTN, Airtel and utl to deal into financial products in partnership with Stanbic bank, DFCU and Standard chartered bank.
Dr Kasekende revealed by the end of March this year, a record 1.9 million people had registered to the financial products.
The deputy governor said that between January and March 2011, there was a record 13 million transactions via the mobile phone as the total value in the same period came to Shs550 million.
"New technology especially in the area of electronic money transfer and agency banking are destined to drive most of the future efforts aimed at financial inclusion," said Dr Kasekende.
Here, Ms Zainab Asiimwe of Smart Campaign added that people will embrace or shun micro credit depending on whether they are treated with dignity when taking or paying back loans.
It was noted in the discussion on sound practices for financial inclusion chaired by Mr Chris Musoke that one of the greatest obstacle to accessing finances was the manner in which clients were treated especially by unethical loan officers who either take bribes before granting loans or those who use uncouth methods to recover money owed to finance institutions.
Mr Musoke called for transparent, appropriate and ethical means of loaning and collecting loans from clients.
The number of registered saccos has risen to 21,005 with a saving portfolio of over Shs83 billion.
Mr Baguma the executive director of Amfiu later told the press that as the government's prosperity for all programme was a great idea, the approach through which it is being implemented is not only misleading but also, an economic disaster.
He called upon government to get involved in the day to day transactions of business especially where its citizens cannot venture for example, buying of food from producers in order to stabilize food costs.
It was revealed that many people borrow money from finance institutions not to inject into production, but on consumption like purchasing domestic necessities like food, medical treatment, school fees, weddings, among others.
Mr Bagume advised the government to support individuals who have proved to be persevering entrepreneurs because they can offer others jobs, thereby improving general livelihoods in the long run, instead of offering everyone who wants loans, and calling it bonnabagagawale.
He said whereas MFIs want to reach out to remote areas to avail credit to more people, they are curtailed by the poor infrastructures making it too costly for both the credit seekers and givers.
Mike Ssegawa
The Monitor/20/05/2011
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