The implications of increasing agent banking on financial inclusion in Uganda

Key words; Agent Banking, Financial Inclusion.

Definition of key words;

According to M.Bhuavana, S. Basantha (2016), defines financial inclusion as an activity of facilitating banking as well as financial services to the low income group people and people from the most vulnerable group in the society.

According to Mwangi and Mwangi (2014), defines agent banking as a company or organization that acts in some capacity on behalf of another bank. It can be a retail outlet contracted by a financial institution to process a client transaction. Bank agents typically operate as satellite branches.

According to the draft Agent Banking Regulations (2016), agent banking is defined as ‘the conduct by an entity of financial institution business on behalf of a financial institution as may be approved by the central bank.


Policy makers and analysts around the globe are all considering financial inclusion as a great catalyst for deepening economic growth and social development. Financial inclusion is an important issue as the population gets access to financial services and products for the improvement in the ways of living as well as improving social welfare.

The rationale of access to financial services was recognized by the world leaders in the outcome document adopted at the 2005 world economic summit. The same summit appropriated that more inclusive finance can help in achieving Millennium Development Goals indeed financial inclusion has far reaching deepening implications on Uganda’s economy.

According to Economic Forum Global Competitiveness report (2016-2017) Uganda was ranked in 120th place out of 138 countries in the area of the affordability of financial services and the most constraint to financial inclusion was cost. The same report portrayed that despite the increase in the level of access to financial services, only a small proportion of Ugandan businesses and households have access to bank loan and or a line of credit. Consequently, domestic credit has financed only 13 percent of GDP over the past decade.

According to a 2014 Bank of Uganda financial inclusion report notes that only 20 per cent of adults in Uganda have access to formal banking services. Of these, 36 per cent are found in urban areas and 17 per cent in rural areas. These figures were backed up by a Finscope 2013 report which noted that 76 per cent of rural Ugandans do not have access to formal banking services.

In a bid to improve and boost Uganda’s financial inclusion, Bank of Uganda released Financial Institutions (agent banking)Regulations 2017 effecting the 2016 amendment to the Financial Institutions Act 2004 which introduced agent banking as a new delivery channel for offering banking services. Many Ugandans both in urban and rural areas have really embraced this idea and are participating in it. Therefore, this write-up looks at the far implications of the increasing agent banking on financial inclusion in Uganda and some of the challenges faced by agent banking.

Implications of agent banking on financial inclusion in Uganda.

Agent banking has positive implications on financial inclusion since its emergence in the banking sector of Uganda.

Wider geographical outreach; all banks in Uganda have extended out their financial services to different parts of the country but most especially in the rural areas. Agents operate under the names of the banks they are offering services for like equi duuka, cente agent, dfcu agent. This has increased access to financial services in most of the rural areas like paying bills, school fees and other financial transactions.

Increased customer base; most of the banks in Uganda have moved a mile stone in the increase of the number of their clients through agent banking. The increased customer base will continue to deepen the financial inclusion as many Ugandans open up accounts with different commercial banks.

Reduced costs of operation for the banks; high costs of operation have been cited as one of the major constraint to Uganda’s banking sector but through agent banking costs of operation will continue to reduce since banks do not need to open up a full branch which comes with high costs in terms of rent, utilities etc. and this is a great panacea for growth in financial inclusion.

Convenience of accessing banking services; many Ugandans used to find it difficult in transacting  and accessing banking services especially in rural areas due to long distances involved in accessing different bank branches but through agent banking there is enhanced convenience by taking banking nearer to customers’ neighborhoods.

Convenience in settlements; over the years many Ugandans have been finding it difficult to settle their debts with banks especially paying principal and loan repayments because of long distances involved in accessing bank branches but through agent banking settlements are paid easily with little or no inconveniences experienced. This will continue to motivate Ugandans to access loans and pay in time.

Challenges of Agent Banking.

Despite the increased number of Ugandans participating in agent banking they do face some challenges.

Insecurity; bank agents experience insecurity like robbery since robbers think that agents hold a lot of cash on behalf of banks for transactions. This still remains a threat to agents participating in agent banking.

Poor mobile network; poor network especially in rural areas delays transactions therefore this calls for liaison between commercial banks and telecommunication companies for smooth running of agent banking.

Unavailability of startup capital; most of Ugandans have interest to join agent banking but lack of enough startup capital is still a constraint. The ratio household savings to GDP in Uganda is still low and this is a true indicator that startup capital is still a challenge.

Liquidity problem; most agents lack enough float on a daily basis to ensure quick and normal transacting. Banks should always ensure that agents have enough top up float to keep the transactions running.

Conclusions and recommendations.

Mobile network should be improved to ease accessibility, more Ugandans should be trained in order to participate in agent banking and more awareness should be conducted by banks to avail information to the population about the essence of agent banking.

Agent banking is improving Uganda’s financial inclusion despite some of the challenges it is still facing. It is worth concluding that most of Ugandans are accessing easily financial services through agent banking.


  1. Well……… This is a great analysis and deduction! I second greatly and hope this writing is a stepping stone to socio-economic development of this country! Keep up

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