Agency Banking goes operational in Uganda
June 23— Financial institutions in Uganda, can now implement their plans for Agency Banking, after Bank of Uganda Governor Emmanuel Tumusiime Mutebile during mid-week, signed on the dotted line to make the service operational.
Agency Banking or Agent Banking is one of notable additions that make up the Financial Institutions (Amendments) Act 2016. The others are legalizing Islamic Banking and separating the Deposit Protection Fund from the Central bank to make it an autonomous.
Under the provisions of the revised law, an ‘agent’ means a person contracted by a financial institution to provide financial institution business on behalf of the financial institution in accordance with the Act.
Secondly, ‘agent banking’ means the conduct by a person of financial institution business on behalf of a financial institution as may be approved by the Central Bank.
Representatives of the top banks agree Agency Banking will help increase financial inclusion, because it the means to penetrate unbanked areas, improve access to, and availability of, financial products and services without having to invest in branch infrastructure. This means banks can look for more savings, but still offer improved customer services.
According to the World Bank, access to financial services enables individuals, households, and businesses to efficiently balance income and expenses over time; to manage financial shocks; and to invest in the development of their human and physical capital.
Most critically, efficient intermediation encourages savers, eases access to credit for borrowers and lowers the cost of credit, which in turn reduces the overall transaction costs for enterprises, making them more competitive.
The overall domestic credit to GDP ratio in Uganda has stood at the average level of 13% of GDP over the past decade, far lower than the figures recorded by regional neighbours. Uganda ranks in 120th place out of 138 countries in affordability of financial services, according to the Economic Forum Global Competitiveness Report (2016-2017).