Make mobile banking relevant to poor

By Norman Katende

State minister for Microfinance Caroline Amali Okao has challenged digital financial services providers that their target of adding 550,000 active users by the end of this year might not succeed unless they come up with innovations that will benefit the local users.

Currently most digital service providers are only offering transfer and saving of funds.

The minister while addressing  a number of high profile delegates  from across the globe at  the four-day global  workshop of "digital financial services going rural" at Munyonyo Speke Resort Hotel  noted that the  current interventions of digital financing  are not aimed at facilitating production  and improving  the  lives of  the locals  despite efforts in reaching  deeper into rural areas, thereby expanding access to financial services.

The workshop is organized by the United Nations Capital Development fund (UNCDF) and is set to end Friday evening after a series of discussions, case study and field visits in Uganda.

 

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International delegates during a cocktail at the launch of a four-day workshop of ‘digital financing going rural’ on February 23, 2015. PHOTO/ Norman Katende

"Indeed without embracing innovation and thinking outside the box, our common aspiration of increasing financial inclusion by maximizing the potential of digital financial services will not be realized. However we must not be satisfied with mere access.  Services must be relevant to rural communities so that is usage is also regular," she challenged.

Though statistics show an increase in financial inclusion in Uganda from 70 % in 2009 to 85% in 2013 with the share of the adult population accessing formal institutions increased by almost two fold from 28% to 54%, while the share of adults using non-bank formal financial services increased from 7% to 34% in the same period,  Okao suggested an offer of interest bearing saving products to encourage additional uptake and usage.

"Deeper understanding of customer habits and needs is necessary, whether by the current mobile money providers, mobile network operators or by banks, whom we hope will soon be able to offer agent banking.  

Bringing the poor into the formal financial sector is recognized as a means through which poverty can be alleviated if not eradicated."

UN country resident , Ahuna Eziakonwa noted that the Ugandan government and the private sector are playing a frontline role in deepening the financial sector and increasing financial inclusion in the country.

"With innovations in technology and participation from all stakeholders including an increased number of mobile agents, financial service providers can substantively increase outreach of financial services to the unbanked and under banked segments of the Ugandan population," she said.

She however noted that there were still more challenges regarding the digital finance ecosystem.  

"Providing greater access in rural areas through agents, developing the right financial products to suit the needs of the unbanked, improving the experience and value proposition for customers, switching high-volume payments from cash to digital all remain major challenges.'

She was supported by the Bank of Uganda governor Tumusiime Mutebile who said that extending the range of financial services like lending and insurance is likely to prove much more challenging and complex.

"The transaction costs of supplying such services include not just physical services but the costs of screening and monitoring customers and also enforcing contracts such as repayment of loans," said Mutebile, who was quick to add that a combination of digital technology and innovative business models tailored to the needs of the poor might provide solutions.