Louis Kasekende: Improving financial literacy in Uganda
Remarks by Dr Louis Kasekende, Deputy Governor of the Bank of Uganda, at the Financial
Literacy Information Sharing Group (FLISG) Meeting, 9 December 2015.
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Governor emeritus, Leo Kibirango,
Dr. Dirk Steinwand, Head of Agriculture and Rural Finance Programme at GIZ (Germany
International Cooperation),
Members of the Financial Literacy Information Sharing Group (FLISG);
Mr. Fagil Mandy,
Management and Staff of the Bank of Uganda present;
Distinguished Guests;
Ladies and Gentlemen.
I welcome you all to the annual Financial Literacy Information Sharing Group meeting.
I thank you all for the work that you have accomplished in the last twelve months, to enhance
the knowledge, attitudes, and skills of Ugandans in as far as access and use of financial
products and services is concerned.
In a special way, I recognize the contribution of our colleagues and partners from the Germany
International Cooperation towards the financial inclusion programmes and, more broadly
financial markets development in Uganda.
Bank of Uganda, as an institution that took the lead in the development and implementation of
the Strategy for Financial Literacy in Uganda, is proud of the achievements we have jointly
achieved in the last one year. Nonetheless, there is still a lot that needs to be done and let me
highlight just a few of the challenges for your contemplation.
First; we need to ask ourselves why the "loan sharks" popularly known as "money lenders"
sustain their business in this country charging very high interest rates, inspite of the many
financial institutions including SACCOS that are charging relatively lower interest rates. I
presume that part of the answer lies in an information-asymmetry problem that needs to be
addressed.
Second; as part of our financial literacy drive and initiative, we have witnessed many savings
and investment groups / clubs formed. The task now is to enhance our tactics in delivering
financial literacy messages to facilitate the graduation of these largely informal savings and
investment groupings into formal establishments with linkages to the productive / real sector
of the economy. How can financial literacy support these entities to maintain the crucially
important element of mutual trust among members, adopt proper management and accounting
procedures, appropriate corporate governance practices, and avoid the pitfalls that fell to
similar institutions in the past?
Third; beyond any regulatory constraints that might exist, how can we adapt financial literacy
messages to improve on the access of our Small Medium Enterprises (SMEs) to capital
markets to catch up with the relatively good performance of other EAC partner states? For
instance in the 2015/2016 Global Competitiveness Report of the World Economic Forum1,
Uganda ranked third in the EAC region behind Kenya and Rwanda in as far as "financing
through the local equity market" was concerned. In other words, Uganda lags behind two of
our EAC partners in using the capital markets to raise funds to finance our businesses.
Similarly, it is also worth asking, how we can use financial literacy to increase the participation
of Ugandans both at individual and SME institutional level in the existing financial instruments
like Treasury bills and bonds. The statistics show that the "others category" in which SMEs and
individuals are classified contributed only 9.9 percent2 of investments in Uganda government
securities at face value as at June 2015. This is in contrast to a share of 44.5 percent,
34.3 percent, and 11.3 percent of commercial banks, pension & provident funds, and offshore
players, respectively. These statistics underscore the need to enhance the financial literacy
messaging so as to encourage people to utilise the financial investment opportunities available
to them and make the most optimal decisions using the available information.
Fourth, many Ugandans have embraced the mobile money revolution, with the number of
mobile money registered users rising from 17.9 million in September 2014 to 19.8 million in
September 2015, while bank accounts have remained relatively stable at 5 million. Our
challenge therefore regards the use of financial literacy messages and the design of
appropriate products and services by the financial institutions to support the transformation of
these mobile money accounts into accounts within the formal banking industry.
Responding to the above challenges requires, in part, the dissemination of consistent and
quality-assured messages, encompassing both financial and economic education. Our flagship
program, the Training of Trainers (ToT) remains the major way through which individuals who
would like to train the population in financial literacy are prepared and certified. Over the years,
we have trained a critical mass of people who can extend financial consumer education to a
sizeable proportion of the Ugandan population, using the curriculum that was agreed upon and
can still be accessed from the "Simplify Money Magnify Life" website and the Trainers Manual.
Going forward, we may need to adapt the programme to further strengthen quality assurance,
respond to the challenges, and safeguard against any "mis-education" of consumers.
I urge members to continue using the website and Trainers Manual as the primary source of
information in their training. It is important that our starting point in educating consumers is the
same. When in doubt, please always refer to the Financial Literacy Strategy that was launched
in August 2013 by the Honorable Minister of Finance, Planning and Economic Development
(MoFPED).
On our part, we reiterate our commitment both in terms of financial and human resources to
further bolster the financial and economic education agenda in Uganda. We are also working
closely with the requisite Ministries, Departments and Agencies of Government to ensure that
the diversity and quality of institutions providing financial services expands, and that they are
well regulated. To that end, I trust that once the amendments to the Financial Institutions Act
and the regulations for the Tier-four institutions that are being considered are passed into law,
we shall have more Ugandans served and probably more efficiently.
As I conclude my remarks, I once again thank the members present here today for the
tremendous work thus far. However, we must not rest on our laurels as a lot remains to be
done.
I thank you all and wish you good deliberations in the meeting.
It is now my pleasure to declare the Financial Literacy Information Sharing Group (FLISG)
meeting open.