of cards on the pos as debit cards. in this regard, bankom must work closely with supermarkets, petrol stations and other outlets to install point of sale machines throughout the country. at this point, in order to help those who are tempted to doze off, i must quote ogden nash ; “ most bankers dwell in marble halls which they get to dwell in because they encourage deposits and discourage withdrawals. and particularly because they observe one rule which woe betides the banker who fails to heed it. which is that you must never lend money to anybody unless they don ’ t need it ”. micro - finance sector : i will now say something about the tremendous developments taking place in the micro - finance sub - sector which developments seem to be unrecognized by observers of the financial sector. overall, the country has about 500 microfinance institutions operating either as community based organizations or ngos, virtually covering the whole country. in the year 2003, parliament passed the micro - finance deposit - taking institutions act, 2003 ( mdi act, 2003 ). the mdi act regulates only those micro - finance institutions that take deposits from the public essentially because there is a public interest in protecting depositors ’ money and those micro - finance institutions which do not take deposits from the public can be well governed by the laws under which they have been licensed to operate. the implementing regulations of the mdi act 2003 were gazetted in 2004. during the year, bank of uganda licensed m / s finca uganda ltd ( mdi ) as the first micro - finance institution to be supervised by the central bank under the act. i know that there are several other applications being processed in the bank of uganda and i want to encourage many other operators to study the benefits to be derived from taking deposits and to apply for licenses. the major challenges facing this sub - sector are bad corporate governance and limited outreach. the financial institutions act, 2004 : the banking sector is strong and is poised to remain so because the regulatory framework governing financial institutions has been further strengthened. the financial institutions act, 2004 ( fia, 2004 ) was enacted and became effective early 2004. the implementing regulations in respect of fia 2004 have already been approved by the minister of finance, planning and economic development and they will soon be gazetted. the new law, coupled with strengthening of bank supervision, have enhanced capacity for supervision and strict prudential regulation of financial institutions. the fia, 2004 strengthened the regulatory framework of the financial sector

strengthened risk management through the implementation of a national cheque standard. we currently have a 3 - day cheque clearing cycle in kampala and a 7 - day clearing cycle for upcountry areas. however, bank of uganda is working together with uba to develop a cost - effective method of implementing a uniform 3 - day clearing cycle for the whole country. i am sure that most of you will recall that in august 2003, bank of uganda implemented another retail electronic payment system for relatively low value transactions called the electronic fund transfer ( eft ) system. in the eft system, bank customers can instruct their bankers to transfer funds from their accounts to named payees in other banks. this system is especially convenient for payment of periodically recurring utility bills like bills for electricity, water and telephone services. while the utility company gets its money on time and as a result, minimizes debt collection expenses, the customer does not suffer the inconvenience of being disconnected when the customer has money in a specified bank account. the eft system can also be used to overcome the current inconvenient system of paying university dues or school fees. parents or guardians should authorize both their bankers and schools to transfer fees from their accounts to school, university or tertiary institution accounts. for this system to succeed, utility companies, educational institutions and banks must support bank of uganda in promoting and popularizing the use of the eft system. the national electronic switch : another recent development in the payment system is the ongoing implementation of an electronic switch that will enable banks to share their automated teller machines ( atms ) with other banks in the industry. the switch will be another facility which can facilitate customer payments for utilities ( i. e. electricity, water and telephone services ), or loading of airtime on mobile phones, and payment for purchases using debit cards, which is technically referred to as electronic funds transfer at point of sale ( eftpos ). bank of uganda has already given its no objection to bankom, a private company, to set up and operate the electronic switch. we expect that in the not - too - distant future, customers of banks which are connected to the electronic switch will be able to access atm and related services at any atm of any bank that is a member of the electronic switch. we also expect the implementation of the switch infrastructure to significantly increase the use of payment cards in the country. all banks are obliged to use the switch so as to enhance the use