BOU, UNCDF to Foster Responsible Digital Lending for Productivity in Uganda


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In a roundtable discussion that brought together different stakeholder groups from the United Nations Capital Development Fund (UNCDF) and the Bank of Uganda (BOU), it was agreed that Digital Financial Services (DFS) have enabled more Ugandans to access formal financial services.

According to the financial index 2021, 66 percent of Ugandan adults are estimated to have access to an account, a rise that has been driven by the penetration of mobile money. Close to 77% of Ugandans borrow money, but only 31 percent borrow from a formal financial institution.

The discussion focused on points like how to drive DFS beyond payments to also impact credit, innovation in digital credit beyond consumer lending, enabling new players and new business models to thrive on the market, and ensuring adequate financial literacy and consumer protection.

“Telecoms evolved about 15 years ago from providing calls and SMS services to mobile money. Mobile money has been focusing on the financially excluded, who are the key people that drive the economy. Mobile money transactions have availed data that is relevant for us to assess the behavior of different segments like women, youth among others,” said Japhet Aritho the managing director, Airtel Mobile Commerce.

He added that data shows that women are better payers than men, and people using a feature phone are better payers than those using smartphones.

According to Doreen Rutazaana, the head of Transactional banking at NCBA, while digital lending platforms can use alternative data sources to access credit risk, there are concerns about the accuracy and reliability of these sources, which make it difficult for formal financial institutions to trust them.

While tackling regulation and consumer protection, Sliver Kayondo, partner at Ortus Advocates, said that there are a lot more people working in the consumer lending space and there is a lot more client protection needed.

According to the statement issued by the BOU on Monday, July 31, 2023, the rise of digital lending platforms has bridged the gap, offering accessible and convenient credit solutions to the masses, and stakeholders will continue to harness this potential and ensure enough is being done to regulate and innovate for digital credit.

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