Tuesday January 12 2016

How barriers affect access to financial services

By James Abola

On December 31, 2015 my children and I sat down to think through and document our targets for 2016. Both children set very ambitious savings goals and we agreed that one of the things that would enable them achieve the goals is having a bank account.

We walked over to a bank that had a branch in the neighbourhood to begin the account opening process. The bank gave these requirements for account opening: two passport photos for each of the children and four photos from me; minimum balance of Shs50,000 for each account, a government issued identity document preferably the national ID, proof of residence and explanation of my source of income.

Each of the requirements provided a real barrier to a person that wished to access financial products or services. The photo studio charged Shs30,000 to make express photos for the three of us. Never mind that the bank could have eliminated this barrier by taking digital photographs of all account opening customers. The opening balance was another barrier; the children had saved Shs35,000 and Shs30,000 respectively, meaning they would still be short of the opening balance.

By demanding for a government issued identity document, the bank forgot or ignored this reality: national identity papers are treated as a privilege or a political tool and not an economic empowerment tool.
The bank wanted a utility bill as proof of residence and yet a large number of Ugandans do not access utility services and the bills for the few with access are usually in the names of their landlords. The implication is that the bank is only interested in offering services to property owning Ugandans with utility bills in their names; which is a pretty small number of people.

The most serious barrier was the question about my source of income. The banker expected me to have a specific and non-changing source of income. I know of many Ugandans who undertake more than three activities to earn income. The banker would not understand why you sell produce during January and February, sell goats during June and July and work as a teacher during the school term because they are using income criteria copied from Europe and America.
If you are a poor or middle income Ugandan, you will find it very difficult or even impossible to access formal financial services.

James Abola is the Team Leader of Akamai Global, a business and finance consulting firm. Email: james.abola@akamaiglobal.co.uk