The Executive Director of Financial Sector Deepening Uganda (FSDU) Rashmi Pillai has revealed that the only way Uganda’s cash economy can change into a digital economy is when Financial Institutions (FIs) embrace financial digital solutions which will support or help to drive the country into a Middle-income status economy.
Speaking during the discussion on the progress of the Electronic Know Your Customer (E-KYC) Project with the stakeholders in the banking and financial sector on Thursday, Rashmi said real-time identification (Electronic KYC) is a fundamental trail on which the entire financial sector rest and once it’s fully embraced it will be a big milestone as far as financial inclusion is concerned.
She added that once the FIs get the idea of individuals (their clients), their businesses and a better understanding of how they participate in the financial sector such as how they spend on school fees, health insurance and housing, how they receive money remittances etc, such data trail will help the financial sector build and customise the unique identifier thus deepening financial inclusion in the country.
Ms Rashmi further noted that if FIs and others embrace digital solutions such as E-KYC, it will be another way of fostering government programs such as the Parish Development Model.
“We hope to see FINTECH, SACCOS and MFIs all of whom are providing majority financial services be able to access KYC, especially Electronic-KYC where there is a direct connection with NITA-U. Once we are able to achieve this, we would have truly contributed to the government of Uganda’s Parish Development Model. Financial inclusion is the second most primary pillar of the Parish Development Model and building E-KYC that helps Financial sector ride on seamlessly and provide innovative products and solutions will go a long way by contributing to government of Uganda PDM.”
Ms Rashmi further emphasized that E-KYC will have a positive impact on Uganda’s digital economy.
“The enablement of the digital economy requires three mandatory pillars 1. Easy digital platforms, Logistics network (Warehousing and means to transport goods and services) and financial services and for these platforms to work we need real-time payments and insurance of goods. Digital economy will be a greater tool to drive Uganda’s economy into middle income status and it will also reduce Uganda’s informal economy as well as increase tax revenues thereby contributing wholeheartedly to economic growth.”
She added that currently 25 supervised financial institutions are connected to the National Identification platforms directly or indirectly through NITA-U, meaning more than 15 milion bank accounts are verified through KYC.
“However, when it comes to financial inclusion, initiatives such as E-KYC, FIs must embrace it in full potential since the world of digital financial services has changed and today the technological innovations have grown by lips and bounds thus an agent need to adapt to new systems like E-KYC.”
In line with her call, Dr Tumubweine Twinemanzi, the Executive Director of Supervision at Bank of Uganda noted that soon bank of Uganda intends to implement critical objectives intended to increase financial inclusion and strengthen the digital economy of the country and this will be done through developing new financial inclusion strategy, and implementing a regulatory sign box. He said all this is aimed at supporting the developing and licensing of new innovative financial products and also accessibility to NIN verification system.
“By developing reliable, secure and easy to use E-KYC framework, Uganda is likely to have a wave of innovative solutions built on the back of a secured platform. A digital E-KYC framework is therefore critical for the financial sector because it enables faster onboarding of new clients, increases the penetration of formal banking and saving services and build reliable data trails,” Dr Twinemanzi noted.
“E-KYC validation platform will be instrumental in identifying the new targets to increase financial inclusions and contribute to achieve those targets, especially those related to increased access and use of formal bank accounts.”
He also promised that Bank of Uganda is also devoted to developing a payment ecosystem that will be cost-effective and efficient for the financial service providers and customers on which provision of innovative products suitable to meet the customers would ride.
The Executive Director of Uganda Bankers’ Association, Wilbrod Humphreys Owor also stated that Uganda is still a heavy cash-driven economy and with the introduction of digital solutions, financial institutions must adopt them as a way of embracing the journey to the digital economy.
Meanwhile, E-KYC is a technical infrastructure which was that in 2019 to enable Supervised Financial Institutions (SFIs) to; Update records of their customers with the National Identification Number. Electronically validate the identity of their customers using their National Identity Number (NIN) for new account opening and transaction validations within a short period.
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