Officials from the Uganda Bankers Association(UBA) have revealed that financial technology (also known as fintech) have helped drive up the number of bank accounts in the country to 23 million from 16 million in seven years.
"In Uganda, we have over 23 million bank accounts as of June 2023 in the system coming from under seven million accounts in 2016, thanks to the partnerships we have with mobile network operators and fintechs. This is a whopping 70% growth in only seven years from 16 million accounts or 2.2 million accounts added into the system annually," UBA chairperson , Sarah Arapta said.
She was speaking during this year's annual bankers' conference at Kampala Serena Hotel.
Arapta noted that disruptive technologies have significantly changed the way the financial eco-system operates and delivers products and services to clients by crashing barriers to entry and creating new markets for access to finance.
"This collectively has positively impacted economic growth through expansion of access to financial services (financial inclusion) reaching underserved consumers, the unbanked and previously hard to reach areas of the country."
The UBA chairperson noted that digital financial services are playing a significant role in growing credit
markets in Uganda in support of the resilience and inclusive recovery following the lull experienced during the pandemic, adding that this growth in digital lending is creating new opportunities contributing to more efficiency and inclusivity by overcoming both geographic access barriers as well other diversity related obstacles.
"Over the last seven or so years, the banking industry has disbursed credit or lent out approximately shs 6 trillion to over 13.3 million customers or micro borrowers via digital lending largely done via mobile phones with ticket sizes for individuals averaging from shs150,000 to shs1,000,000."
She noted that of the above 13.3 million customers, over 560,000 are SMEs who take between shs7 million to shs10 million daily, every 2-3 days in support of their businesses who include banking and mobile agents, retail shop owners, suppliers, market vendors dealing in food crops and produce among others.
The BOU deputy governor, Michael Atingi-Ego said technology-enabled innovation is transforming financial services by producing new business models, applications, processes, or products that enrich people's access to safe and secure storage of money; easier and quicker payments; loans; effective financial management; and other financial products and services, including investment and insurance.
"Fintech is improving financial inclusion. Mobile money has enabled millions of people who previously had no access to formal financial services to send and receive money, make payments, and save. Fintech has transformed payment systems, making them more efficient and accessible, such as through digital wallets and mobile payments," Atingi-Ego said.
He noted that fintech through data analytics, artificial intelligence, and machine learning, is facilitating rich insights into consumer behaviour, risk metrics, and financial and economic trends and thereby shaping the evolution of banking and financial services within the country's operating environment also influence central banking.
The BOU deputy governor however warned bankers that as more financial transactions move to digital platforms and online, the reliance on IT infrastructure grows, and so does the related IT and cyber security vulnerabilities.
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"Cybersecurity and IT security, therefore, become increasingly important because the new convenience comes with increasing risks, as cyber criminals exploit vulnerabilities in digital systems to breach defences and gain unauthorised access to valuable data, which is the new oil," he said.
"Cyber-attacks targeting banks pose risks to individual institutions by disrupting critical financial operations, compromising transaction processing, access to customer accounts or performing essential functions. This can diminish public confidence in the banking system, especially if disruptions affect multiple banks or persist for a long time. The potential impact of cyber risks on the financial system invites a sector- wide approach to cyber security because a chain is only as strong as the weakest link."
