Bank of Uganda Urges Public to Utilize Banks for Secure Transactions and Remittances

In a move to enhance financial security and boost the circulation of money, the Bank of Uganda has called upon the public to cease the practice of hiding money in unconventional places, such as cow horns. This appeal was made by Deputy Central Bank Governor, Prof. Augustin Nuwagaba, during a national debate organized by Equity Bank under the theme, "Re-Routing Back Home: Funds Transfer for Powering Personal and Continental Growth."

Despite the critical role remittances play in economic development, several challenges persist in the sector:

High Transaction Costs: The cost of sending remittances remains high due to limited competition and inadequate cross-border interoperability. Globally, the average cost of sending US$200 is 6.4% (US$12.8), while in Sub-Saharan Africa, it is even higher at 7.9% (US$15.8). These figures surpass the UN Sustainable Development Goal (SDG) target of 3%.

Labor Market and Migration Policies: Changes in job markets and migration policies in remittance source countries impact the inflow of funds into Uganda.

Informal Remittance Channels: A significant portion of remittances is sent through informal channels, making them difficult to track and affecting national economic planning.

Access to National Identification: Many Ugandans lack National IDs, which are essential for meeting Know Your Customer (KYC) requirements when opening bank accounts.

Compliance with Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT) Laws: Ensuring the declaration of the sources of funds is a compliance hurdle for many individuals and institutions.

Information Asymmetry and Lack of Trust: There is a lack of awareness and trust in formal banking institutions, leading many to rely on unofficial remittance channels.

Strong remittance inflows continue to drive regional economic growth. Uganda recorded remittances worth $1.4 billion, representing 15% of total inflows. Rwanda received $0.5 million (9.3%), Kenya $4.2 million (2.6%), and Tanzania saw a remarkable $7 billion, contributing to a 4% growth rate.

Moreover, stability in Sudan has played a key role in trade relations between Uganda and South Sudan, with a trade balance standing at $155 million annually. This financial interaction is a significant boost to Uganda’s economy.

According to Deputy Governor Prof. Nuwagaba, financial inflows from tourism, trade, and individual remittances are crucial in maintaining the stability of the Ugandan shilling.

Equity Bank’s Managing Director, Gift Shoho, emphasized the bank’s commitment to integrating financial services that foster economic and social empowerment. He highlighted that the bank, with 50 active branches and a customer base of 2.2 million, is now the second-largest bank in Uganda.

Shoho reaffirmed Equity Bank’s dedication to financial inclusion, stating, "We command a significant market share in the economy, making us one of the banks playing a crucial role in expanding financial services in Uganda."

In a bid to boost industrialization and support African entrepreneurs, Equity Bank has pledged that 15% of its lending portfolio will be allocated to the manufacturing sector. Furthermore, recognizing the vital role of agriculture in Uganda’s economy, Shoho announced that "At least 30% of our lending in any economy we operate in should be directed towards food and agriculture."

The Bank of Uganda’s call for increased banking engagement and remittance tracking aligns with efforts to enhance economic stability and financial inclusion. Equity Bank’s proactive approach in providing integrated financial services further reinforces this agenda. With targeted lending in manufacturing and agriculture, the financial sector is poised to drive sustainable economic growth in Uganda. Encouraging the use of formal banking channels will not only boost money circulation but also promote secure transactions, benefiting individuals and the national economy alike.