Financial Inclusion in Uganda

This briefing note discusses how Uganda can capitalize upon existing good practices and innovation to become a leader in increasing access to formal finance in East Africa. It outlines the existing barriers to linking informal savers to formal services, and also recommends specific steps that can be taken to overcome these barriers. The note suggests that broad and inclusive finance is essential for sustainable development in Uganda and enabling a greater percentage of the population to access formal financial services can bring significant benefits to individuals, businesses, and the government. Key recommendations provided in the note include:

• Create a more holistic definition of financial inclusion;
• Recognize that Village Savings and Loan Associations (VSLAs) are one of the most effective mechanisms for financial inclusion that promote a savings culture, improve access to small loans for investment, and build a social fund that strengthens resilience to external shocks;
• Develop incentives and regulation to encourage the private sector to develop pro-poor products, services, and education that link informal savings groups to the formal sector;
• Expedite the finalization and passage of the Tier 4 microfinance regulatory framework, clearly providing for guidelines for licensing and supervision of all Tier 4 financial institutions with the purpose of improving their efficiency.