Bank of Uganda sees Agency Banking as catalyst
June 28— Mrs. Justine Bagyenda represented Prof. Emmanuel Tumusiime Mutebile, the Governor, Bank of Uganda at the first Agency Banking conference hosted by Stanbic Bank Uganda together with the Uganda Law Society. Below is her speech to the invited guests at the conference.
Let me start by conveying the apologies of the Governor, Bank of Uganda, Prof. Emmanuel Tumusiime-Mutebile who is unable to be here this morning due to official commitments outside Uganda.
I am, however, greatly honoured, on behalf of the Governor, to address this Agency Banking Conference on the regulator’s expectations of Agent banking. I therefore wish to thank Stanbic Bank for organizing this conference which I believe could not have been held at a better time.
I wish to inform all delegates that after the Financial Institutions Act, 2004 was amended in 2016 to allow financial institutions to use agents as a delivery channel for financial services, the Bank of Uganda, in consultation with the Uganda Bankers’ Association (UBA) and the Ministry of Finance, Planning and Economic Development (MoFPED), embarked on drafting the Agent Banking Regulations. The Regulations are now ready to be gazetted. I wish to applaud all stakeholders, most importantly, the MoFPED and UBA for their valuable input.
Agent banking, as a form of branchless banking, enables licensed financial institutions to extend services to customers through third-parties, usually retail outlets and other businesses. In countries such as Kenya, Brazil and Mexico, etc. where Agent Banking is being conducted, there have been enormous benefits for the public.
We, therefore, expect agent banking to be a catalyst for financial inclusion and the deepening of the financial sector. The unbanked will be brought into the banking system, thus increasing the outreach of financial services, particularly in the rural areas by addressing the major barriers to banking including; access, affordability, identification, etc.
By being closer to where the people reside, the problem of distance to mainly urban centers where currently bank branches are located is solved. Banks will also not need to set up expensive branches. This will reduce the cost of delivering banking services, and it will result in reduced cost of banking to customers. The recent introduction of National Identity Cards will go a long way in solving the identification problem, which is a major consideration given the need to comply with Anti-Money Laundering and Combating Terrorist Financing Legal and Regulatory Framework.
The provisions of the Agent Banking regulations cover most, if not, all the regulator’s expectations. They specify the obligations of the financial institutions in selection, training, management and supervision of agents. They specify that a financial institution shall enter into an agreement with the agent it wishes to appoint and obtain Bank of Uganda’s approval before the appointment.
The agent should have been operating a business for at least a year and should have held a bank account for the last consecutive six months. The particular financial services to be offered by each agent must be specified in the agreement because these will vary according to the sophistication and capacities of the agent. For instance an established supermarket outlet in a town could offer more services than a small shop in a village trading centre.
The Agent Banking regulations also provide for prohibitions such as; agents cannot conduct foreign exchange transactions, cannot carry out cheque transactions and cannot charge fees. Financial institutions are also not allowed to enter into exclusivity agreements with agents meaning that an agent can serve more than one financial institution.
Financial institutions are supposed to put in place robust Information Technology and Communication systems for agent banking because the service will mainly take the form of digital financial services. Transactions are expected to be real time. Risk management systems must, therefore, be robust given the threat of cyber-crime. Financial institutions must have complaints handling mechanisms which must be known to customers. Finally, financial institutions are obliged to report periodically to the Bank of Uganda on agent business.
With these remarks, I once again thank Stanbic Bank for organizing this conference. It is my ardent hope that this conference will give insight to the various players who will be involved in Agent Banking operations.
I thank you.