Central Bank to review banking laws

May 20, 2010

BANK of Uganda is to review laws that regulate financial institutions to enable them reach the rural population.

By Jude Kafuuma

BANK of Uganda is to review laws that regulate financial institutions to enable them reach the rural population.

Experts in agriculture, and financial and rural development have said agriculture continues to be among the least attractive sectors because farmers live in remote areas where financial institutions have not reached.

Benedict Ssekabira, the director of non-bank financial institutions, said the central bank has asked banking institutions to provide more electronic banking facilities to upgrade to acceptable standards.

He made the remarks on Wednesday at the opening of a three-day regional workshop on financial growth at the Commonwealth Resort Hotel in Munyonyo.

The meeting attracted experts in financial management, agriculture, rural development and risk management. It discussed ways of boosting the financing of agriculture and creating wealth through investments.

The workshop was organised by the African Rural and Agricultural Credit Association, a regional association of financial institutions, and Finance Trust Limited, a local financial institution.

According to Ssekabira, the World Bank estimates that in Sub-Saharan Africa, only 20% of households have bank accounts compared to 90% in developed countries.

He said this was partly due to lack of financial institutions in rural areas where most people live.

Ssekabira criticised the member-based microfinance institutions that aim at serving the needs of those who start them. “These small member-based institutions offer limited services that do not support financial growth,” Ssekabira said.

In Uganda, he said, most savings are made outside the formal financial sector, while low income earners borrow mainly from relatives and informal groups.

Finance Trust chief Mathias Katamba said agriculture receives little financing because of the high risks associated with the sector.

“Rural areas are characterised by higher transaction costs and risks due to high poverty levels,” Katamba noted.

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