‘Treating fintechs like a second cousin is wrong’

“The reaction we got was... strange,” she says. Ms Kimbugwe expected a stampede of panicked customers when BoU made the announcement. They were still operating out of the Kololo area in Kampala, bracing for chaos.

“We even warned the building management about a potential mob and arranged extra security to avoid disturbing other tenants,” she recalls. But no one showed up. Instead, the first calls came from the heavy hitters—big customers worried about the fintech’s health and asking how they could help.

At the time, Ms Kimbugwe admits her head was spinning. Back then, her biggest clients included Wenreco, a power distributor in western Uganda, pushing more than a billion shillings in monthly trade volumes, and Boda Banja, with equally hefty numbers. Their app became the company’s lifeline when BoU stepped in, allowing payouts to customers who needed their money.

Ironically, many withdrew just to test the system—then redeposited it on the App. Teething problems Her experience with licensing exposed her to the harsh truth for Ugandan fintechs: thriving in a market built for foreign giants means navigating more than just customer acquisition— it means battling a system ill-equipped for local players. What these firms do is they drive digital payments, thereby bridging gaps in financial inclusion.

“We’re the ones connecting the dots— working with banks for safekeeping funds and telecoms for last-mile transactions,” she explains. Fast forward to today: With her licence reinstated this month, a full board in place, and the required Shs500 million reserves locked in, Ms Kimbugwe is back in the game. Her fintech boasts a customer base of 100,000.

Still, she knows the fintech landscape in Uganda is far from rosy. While Africa is making waves in the global tech funding scene, Uganda’s startups often remain in the shadows—or absent altogether. Uganda’s fintech scene isn’t the darling of investors. Yet funding is precisely what these startups need—to build infrastructure, conduct market studies, and roll out their ideas.

“Uganda’s fintech scene lacks Kenya’s maturity and investor confidence, a gap shaped by decades of market development across the border,” says Ms Kimbugwe, shaking her head.

The contrast is stark. Kenya’s fintech evolution began in the 2000s, while Uganda’s only picked up in the 2010s. “In Kenya, even matatus accept mobile money, making fintech services ubiquitous. That market maturity shaped over decades attracts investors. Still, in its fintech infancy, Uganda offers a stark contrast: high taxes, slow adoption, and limited market size. ‘Kenya had a 10-year head start.‘ Here, we’re still proving our worth,” says Ms Kimbugwe.

And these are the things investors take note of—market reach. “They look at three things: product versatility, market size, and the cost of customer acquisition,” Ms Kimbugwe says. Turning the corner? Kenya’s large, money-savvy population gives it an edge.

“Here? Uganda’s high tax regime and the numbers don’t add up for most investors,” she says. Kenya rolled out the red carpet for fintechs, and now the whole world’s watching. Uganda? We’re still figuring out how to unlock the door. Big Tech— Facebook and Google—set up shop in Nairobi, signalling confidence in Kenya’s market potential. Uganda, however, is making strides.

The March 2024 fintech report of KPMG, an audit firm, notes a 58.3 per cent jump in the number of fintechs, from 24 in 2022 to 38 in 2024. Transactions rose 15.1 percent to Shs612.8 billion, while mobile money transactions surged 29.1 percent to Shs21.5 trillion. Customer balances also grew 19.6 per cent to Shs1.62 trillion. Mobile money agent numbers ballooned by 65.8 percent to 741,400, high- lighting a growing ecosystem. Yet Uganda still lags behind regional peers in many aspects.

Take funding, Uganda averages $2.6m (Shs9.5b) annually; Rwanda hits $6m (Shs22b); Kenya pulls in $301m (Shs1 trillion); Nigeria $243m (Shs885b); and South Africa $367m (Shs1.3 trillion). Mobile phone penetration? Uganda, at 67.7 percent, is far behind South Africa’s 195.4 percent; Kenya’s 118.7 percent; and Rwanda’s 86.2 percent. Internet penetration is equally dismal—27 percent compared to South Africa’s 74.7 percent. Uganda’s fintech market? Worth $4.6 billion. Kenya?

Almost triple at $11.67 billion. Nigeria’s fintechs make ours look microscopic, sitting on a whopping $36.2 billion KPMG’s data shows.

“What does that say about our industry?” Ms Kimbugwe asks. “We have work to do. Licensing here is tougher. In Kenya, it’s simpler. And there are no tax waivers for locals. I’ve invested more than $2m (Shs7.3b) in my company, yet I get zero incentives as a local investor. What message does that send?”

Slim odds

Now seeking $10m (Shs36.4b) to rebuild her fintech after a downturn, Ms Kimbugwe plans to allocate more than 90 percent of it to markets outside Uganda—Ethiopia, Somalia, and the UAE.

Uganda?

“Probably just a million” is the response from Ms Kimbugwe, who plans to maximise the returns on this investment. “Foreigners borrow capital at one to two percent, while we pay much higher rates. They come with deep pockets and can afford extensive market studies. They’ll spend Shs200 million just to understand a market before launching a product. We can’t match that,” she explains. Local fintechs also face talent shortages, unlike their foreign counterparts who import skilled teams.

“It’s a tough game. From ideation to product rollout, they move faster and smarter because they have resources we simply don’t,” she asserts, adding: “We hypothesise a lot. Sampling here and there. Who’s going to invest $20m (Shs72.8b) in a market study here? That’s what happens in markets like Nigeria. That’s operational capital here.” Since its inception, her company has paid over Shs500 million in taxes.

“Half a billion in taxes! Imagine what that could do for operations. A two-year tax waiver would help us grow,” she argues. Yet, no such relief is in sight. One of the more frustrating aspects for fintechs like hers is being compared to legacy banks. The regulatory frameworks treat them almost equally, despite fintechs being a fledgling industry compared to century-old banking institutions.

“A bank is already established—in talent, systems, and processes. This industry hasn’t even hit 20 years, but we’re being regulated like banks. Even cus9tomers compare our service quality,” she laments.

The unruly stepchild While some fintechs have scaled impressively—she estimates around eight or 10—this rapid growth has prompted stricter regulations. According to her, with regulators coming from banking, they treat fintechs like unruly stepchildren—potential risks instead of innovative allies. “They’re cautious, fearing backlash if something goes wrong. Customers blame the Bank of Uganda for licensing everyone without due diligence,” she says.

The result? Fintech founders find themselves overwhelmed. “When you start, you’re obsessed with bringing your idea to life. Then a payment goes through, and you’re thrilled. But the central bank steps in: ‘We need policies, procedures, audits, this and that.’ Suddenly, your idea’s drowning,” she adds.

Despite these obstacles, the numbers are telling. Her company projected $20m (Shs72.8b) in transactions for the year, though an eight-month hiatus significantly dented revenues.

“We expected $800,000 (about Shs3b) in revenue, but we’re now in a bigger loss position. We’ve kept the office running, maintaining data centres, Internet connectivity, and international certifications like CIDSS that license alone is $11,000 (Shs40m) a year, excluding tax,” she explains.

For Uganda’s fintech ecosystem to thrive, foundational changes are needed—from tax incentives to more supportive regulations. Without these, industry players argue, the sector risks being stifled before it truly takes off.

“This market humbles you. You can pour money into a product, and Ugandans will still hesitate. If they think a mzungu or a Muganda is behind it, they might reject it. There’s also a deep mistrust—fraud has burned many, and some stick to reports over experience,” she says.

It’s here that I tell her that reports are saying Uganda is the best investment destination. “Who said? In Uganda, claiming to be the best fintech is as easy as updating your LinkedIn bio—but is it true? Yes, sure, starting a business in Uganda is easier than in Rwanda. But licensing? That’s where the real headache begins—we’re the toughest in the region. The investment index? Forget it. The big players—South Africa, Nigeria, Kenya, Egypt—dominate, with Ethiopia now rising,” she says.

Here’s the scale difference: a pilot product in Nigeria or Ethiopia often matches Uganda’s entire market size. A Nigerian fintech can onboard up to 18 million users in two years just in pilot studies—nearly the size of MTN Mobile Money’s entire customer base in Uganda. Then there’s infrastructure. We still have areas with no Internet. Smartphone penetration is low, and card payments are rare. In Nigeria, for example, card products dominate— even in random shops.

Contrast that with Uganda, where telcos have built giant, expensive networks. Building an agent network here costs millions of dollars, Ms Kimbugwe says,and telco agents won’t even work for other service providers. So, why would an investor choose Uganda over markets with ready infrastructure, she asks.

“Against all odds, I became one of the first women locally licensed in this space, raising more than $2m along the way and a few companies here have invested over $5m,”she says. “Recovery is our uphill task. Over the past 100 days, we’ve overhauled our systems, secured a new security provider, and met regulator y demands— especially from the central bank,” she adds.