
How Regulation and Government Policy Affect Financial Inclusion
A combination of government policies and regulations has significantly boosted financial inclusion in Uganda. These measures have aimed to increase access to financial services, particularly among the underserved population, promoting economic growth and development. Overall financial inclusion has jumped from below 30 percent in the late 2000s to 81 percent in 2023 (Finscope Report 2023). This would be just a passing tale but for one thing: Government and the financial sector regulator took steps to boost inclusion.
Enablers
Among the policy and regulatory enables to financial inclusion have been:
Support to interoperability of mobile money across service providers, by both Government and Bank of Uganda. BoU and a development partner in the mid-2010’s commissioned a scientific study that concluded that opening of mobile money transfers across service providers would enhance revenue and profits for each service provider. Mobile money transactions across networks is a reality today, helping many would be excluded people.
Interoperability has enabled users to transfer funds between different mobile money platforms, expanding the reach of these services and making them more convenient. It has also reduced transaction costs by eliminating the need for users to have multiple accounts, although taxes on mobile money transaction is still a hinderance.
Enactment of the National Payments Act 2020 and National Payments Regulations, which mainstreamed mobile money and other digital payments into the financial sector through
regulatory oversight: bringing mobile money operators under the Bank of Uganda’s supervision for safety and soundness. According to Finscope Report 2023, most low income people use mobile money not just as a payment system but as a saving mechanism too.
Innovation: The regulations have encouraged innovation in the payments sector, fostering the development of new products and services. Through regulatory sandboxes (incubation of technologies with permission and observance of the regulator), FinTechs are maturing as instruments for pushing the frontiers of financial access.
National financial inclusion strategies: Both Government and BoU have in the past two decades come up with strategies and programmes for enhancing financial inclusion, some of which have worked. These strategies have provided a clear roadmap for promoting financial inclusion, identifying key target groups, and implementing interventions including financial literacy and strengthening of pro-poor financial service providers.
Overall Impact
The policies, regulations, and technology/ innovation have collectively supported significant progress in financial inclusion in Uganda. The Key impacts is in the overall boost in financial inclusion from under 30% to 81% in less that 20 years.
Conclusion
In conclusion, the implementation of targeted policies and regulations has been instrumental in driving financial inclusion in Uganda and other countries. While significant strides have been made, ongoing efforts are necessary to address remaining challenges and ensure that financial inclusion benefits all segments of the population. The taxation issue. Digital literacy, internet and other digital infrastructure, further financial literacy and technology nurturing all need keen attention. By continuing to these, Uganda can further unlock its economic potential and improve the livelihoods of its citizens.
Keren Obara
Digital Marketing Associate