The rapid growth of financial technology (fintech) is reshaping Uganda’s banking sector, provid- ing new opportunities for finan- cial inclusion and transforming how Ugandans manage their money.

According to a report by Financial Sector Deepening Uganda (FSD Uganda), the fintech sector in Uganda created over 10,000 jobs in 2022. This is expected to increase to over 20,000 jobs by 2025. As of October 2024, there were 184 fintechs in the country.

Fintech companies, which now contrib- ute 7% to the nation’s GDP, are offering digital banking services, mobile payments, lending platforms, and wealth manage- ment tools that cater to both individuals and businesses. Many Ugandans now find themselves turning to these platforms for services that were once exclusively offered by traditional banks.

According to data from Uganda’s cen- tral bank, as of 30 June 2023, there were 42.9m registered mobile money customers in Uganda. This is an 11.4% increase from the 38.5m registered customers in June 2022, a key driver of fintech growth in the country.

The value of mobile money transactions in Uganda grew to $52bn in the 12 months to June, a 23% increase from 2022, an indi- cator of the sector’s increasing dominance.

Fintech companies are making financial services more affordable for Ugandans by operating more efficiently than traditional banks.

For instance, Chipper Cash, a fintech company offering mobile money services in Uganda, charges a flat fee of Ush1,000 (about $0.27) for sending money to another Chipper Cash user, even across borders. This is significantly cheaper than the higher fees typically imposed by tradi- tional banks for similar services.

Zofi Cash, another fintech company, provides salary advances to salaried em- ployees in Uganda. The platform uses a proprietary algorithm to assess the cred- itworthiness of borrowers, typically em- ployees of partner companies. Zofi Cash offers loans of up to 50% of an employee’s monthly salary, with repayment auto- matically deducted on the borrower’s next payday, making the process seamless and efficient for both the employer and the employee.

The impact of fintech on Uganda’s banking industry has been profound. Tra- ditional banks, once the mainstay of fi- nancial services, are now facing increased competition and are being forced to adapt.

Sh1,000 banknote is the most popular

Demand for cash in Uganda continues to rise, with the USh1,000 ($0.26) banknote emerging as one of the most circulated denominations, according to the Bank of Uganda’s 2024 Annual Report.

The banknote holds the largest share at 26% of total circulation, followed closely by the USh10,000 note at 23% and the USh20,000 note at 16%. Denominations including the USh2,000, USh5,000, and USh50,000 notes, account for the lowest circulation shares at 12%, 11%, and 11%, respectively.

The USh1,000 banknote is ideal for small purchases, such as buying groceries, transportation fares, or paying for street food. Its denomination fits daily needs for many Ugandans, especially in rural areas where small-scale transactions are more frequent.

Uganda has a large informal sector, where cash is often preferred, with small traders, street vendors, and other informal businesses frequently using the USh1,000 note for quick and convenient exchanges.

The report highlights a 14% increase in cash circulation, with withdrawals of banknotes and coins from the central bank rising from USh11.6trn ($3.09bn) in June 2023 to USh13.2trn ($3.52bn) by June 2024. This growth is attributed to increased eco- nomic activity and a continued preference for cash transactions due to persistent challenges in digital infrastructure and high transaction fees. n

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