BoU mulls agency banking as it moves services closer to public

Louis Kasekende(R), Deputy Governor Bank of Uganda unveils KCB bank Forest Mall branch. Looking on is KCB Uganda Chairman Samwiri Njuki (2nd R) , Maj Gen (Rtd) Geoffrey Okanga (2nd L), the Kenyan High Commissioner and Joram Kiarie (L) KCB Uganda managing director. PHOTO Rachel Mabala

What you need to know:

Only 20 per cent of Uganda saves with supervised financial institutions


In an attempt to increase the banking population, Bank of Uganda wants to roll out agency banking in the country, deputy governor Louis Kasekende has said.
Agency banking refers to situations where commercial banks recruit other businesses with a nationwide presence to offer banking services on their behalf.
The partnership between financial institutions and agents is expected to help the former take services closer to the people, and more importantly, to remote, unbanked areas.
Under agency banking, customers can apply for loans, deposits and withdraw cash at locations such as supermarkets, shops and fuel stations around the country.
Agency banks also provide normal banking services such as cash deposits and withdrawals, salary payments, pension payouts, disbursement and repayment of loans, transfer of funds and the issuing of mini bank statements, all through the shared facilities.
However, in what appears to be the overriding objective of the central bank, agency banking allows banks to reach new clients, who can open new accounts and save some money.
Speaking during the opening of the KCB branch at Forest Mall in Kampala last week, Dr Kasekende said the Central Bank is doing everything possible to fast track the amendment of the Financial Institutions Act 2004, which if passed, will allow for agency banking to take shape among others.
According to him, the first parliamentary council has already approved the principles of the law which is now set to go back to Cabinet for endorsement before proceeding to Parliament for amendment.
If passed as anticipated, the law will especially pave way for agency and Islamic banking.
“Fast tracking the amendment of the Act is one of our actions to improve access to financial services across the country,” Dr Kasekende said.

challenges facing the agency banking model

There are a number of challenges facing the agency banking model.
According to Mr James Mwangi, the Equity Bank chief executive officer, commercial banks are finding problems establishing outsourced banks. “We are facing problems converting these outlets into what we would be comfortable to call outsourced banks,” Mr Mwangi was quoted in Technology Banker magazine.
He added: “Our agency selection criteria are showing some weaknesses, and we are now re-organising what we demand of agents in order to favour cash heavy operations that meet this demand.”