De-risking of the agricultural sector which employs the majority of Ugandans will be critical if the country is to deepen access to financial for the underserved, the Central Bank Governor, Emmanuel Tumusiime Mutebile has said.
He said it is important to interrogate whether the impact of the investment that has been made towards furthering financial inclusion has been tangible.
The Bank of Uganda Governor made the comments on Wednesday while speaking at a forum organized by Financial Sector Deepening Uganda (FSDU) at Kampala Serena Hotel.
“Financial inclusion statistics count most when they reflect unlocking economic potential through harnessing national resources most specifically through job creation thereby reducing poverty. This is important for prosperity for all,” Mutebile said.
He said much effort has been spent yet about 68 percent of the Ugandan population still engages in subsistence agriculture.
“Yes, a lot of ground has been covered as revealed in the latest FinScope survey results, but a lot more needs to be done to unleash the full potential for finance to spur economic growth and development,” he added.
The Governor noted that; “The challenge that remains for all stakeholders in fostering financial inclusion is the de-risking of the agricultural sector which employs the majority of our people”.
This is where much of the attention must be put if Uganda is to make any significant progress to making financial inclusion work, he said.
Commenting on the positives that have so far been registered in furthering access to financial services, Mutebile cited the introduction of Mobile Money services in Uganda in 2009 which he said revolutionized the formal financial services sector.
Mobile Money services pushed mobile usage from 28 percent in 2009 to 58 percent in 2018. Technology solutions have reduced transactional costs, counter party risks and information asymmetry, according to the Governor.
However, he was quick to add that the technology-driven financial infrastructure of today and tomorrow will count fully “when it is made accessible to consumers with knowledge, skills and confidence to constructively engage with the financial system”.
He said the Central Bank has a duty to ensure that the regulated financial institutions fruitfully balance risk mitigation and innovation by championing smack regulation or supporting financial sector deepening.
It is in line with this duty, he said, that the amendments into the Financial Institutions Act were championed, to support the agency backing, bank insurance and Islamic banking.
“These are all expected to deepen financial inclusion and extend access to financial services in a rationalized manner”
Other participants in the forum including former Minister of Agriculture, Victoria Sekitoleko and the Executive Director of Private Sector Foundation Uganda (PSFU), Gideon Badagawa stressed how crucial it is to organize farmers in cooperatives.
“How do we make sure we de-risk agriculture? By organizing farmers. Today, the farmers are not organized. No cooperatives, no farmer organizations. If they are there, they are haphazard and they are not linked to markets,” Badagawa said.
“And we are arguing as the private sector that the best way to link the farmers to market is through industry, and that is why we must support and promote agri-led industrialization”.
On her part, Rashmi Pillai, the Executive Director of Financial Sector Deepening Uganda (FSDU), said it is important to reflect on whether the supply-driven model of financial inclusion provides a suitable approach or whether Uganda should consider a different approach.
“Increased financial wellbeing and improving outcomes for every Ugandan will lead to inclusive growth. Growth that provides opportunities for low income people to productively participate in the economy,” Rashmi said.
She says the financial sector can create employment opportunities which are critical in economic development.
“As of today, we know that every year, 600,000 young adults in Uganda join the labor force. 4 0ut of 10 will be unemployed, and by the time we hit the SDG goals of 2030, this labor force is going to be tripled”.
Rashmi said that despite the positive economic growth indicators, if nothing is done to change the employment outlook, the result will be increased poverty.