loans and deposits, has not always been successful in uganda, possibly because the operating costs have been too high. several of the mdis which were licensed in the 2000s have since been converted into commercial banks. mobile banking mobile banking was first introduced in uganda in 2009. the business model involves a partnership between a mobile phone operator and a commercial bank. the services offered have so far been restricted to basic retail payments and money storage services ; money can be transferred from one customer to another and it can also be stored in a customer ’ s virtual account. the main regulatory concern of the bou has been to safeguard customers ’ virtual money which they purchase, with cash, from mobile money agents. the bou has only allowed mobile money operations when this is done in partnership with a supervised commercial bank. mobile money operators have to hold, in an escrow account in their partner commercial bank, the equivalent in value of all the mobile money that they have sold to their customers. this means that the mobile phone operators, which are not licensed financial institutions, cannot themselves intermediate the funds that they have mobilised through the sale of mobile money. customers who purchase mobile money have a similar level of protection as that which is afforded to depositors in a commercial bank. the bou has also issued mobile money guidelines in 2013. the guidelines stipulate an approval process for all agents who wish to engage in the provision of mobile money services and the roles and responsibilities of all parties involved. they also stipulate the safeguards to protect bis central bankers ’ speeches customers, such as the requirement that customers ’ pin numbers must be used to authenticate all transactions. as can be seen in table 2, the growth in mobile banking has been phenomenal. the number of registered mobile money customers exceeds half of the total population of uganda, although this number may include some people who are registered with more than one operator. in terms of extending access to financial services, mobile banking has made a much larger contribution than any other recent innovation. the regular finscope surveys reveal that the share of the population with access to formal financial services increased from 28 percent in 2009 to 54 percent in 2014 and that almost all of this increase was due to access to mobile banking. however, although the growth of mobile banking amongst the previously financially excluded has been impressive, we should also bear in mind that the range of financial services available through mobile banking is very narrow ; as i have already noted it is restricted to basic payment transactions and storage of money. agent

more financially sustainable basis. two of these innovations are of particular importance for uganda. the first is the use of mobile phone technology to deliver financial services. the 2018 finscope uganda report revealed that 57 percent of adults in uganda use digital payments mechanisms such as mobile money and that 23 percent of adults in uganda hold savings on their mobile phones. the second, more recent, innovation is the advent of agent banking, made possible by the amendments to the financial institutions act in 2016. commercial banks in uganda already have more than 4, 500 agents operating in almost 6, 400 outlets around the country. agent banking is allowing banks to access customers at much lower cost than is the case in the traditional banking model, as the bank can achieve savings on their costs of bank branches and staff. probably the most difficult challenge pertaining to financial inclusion in uganda is that of widening access to formal sector credit. the 2018 finscope uganda report found that only 5 percent of adults access credit from a formal financial institution such as a commercial bank, sacco or microfinance institution. access to credit is a more challenging aspect of financial inclusion because financial institutions incur substantial costs related to credit risk, for example the costs of screening potential borrowers, the costs of monitoring borrowers and recovering loans, and where loans cannot be recovered, the costs of loan defaults. about two decades ago, following the emergence and growth of the micro - finance industry in south asia, it appeared that the micro - finance business model, often utilising group lending schemes, offered a way of lending to small borrowers which minimised default risks and this made this lending commercially viable. but that business model has been much less successful in africa and microfinance institutions currently provide credit to only about two percent of the adult population in uganda. if access to credit from formal financial institutions is to be widened in uganda, to include more than a very small share of the population, these institutions will need to develop innovative business models and products which can mitigate the risks of loan defaults. finally, i want to remind everyone that today is world savings day. this is an annual event held around the world for the purpose of encouraging people to save and may i add, to safely keep their savings in formal supervised financial institutions. there is a very clear symbiosis between the goals of financial inclusion and the promotion of savings. i hope that our efforts to enhance financial inclusion such as financial and entrepreneurial education, will contribute to raising the savings rate in