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FSD: Beyond financial inclusion to usage

Christopher Musoke

INTERVIEW: Christopher Musoke is the CEO of Financial Sector Deepening Uganda (FSD). He spoke to the Independent’s Agnes E Nantaba about progress in the financial inclusion in Uganda.

What are the key elements in your management style as a manager?

My concern is to ensure that as a team we achieve sustainable improvements in the livelihood of poor people. I create a work environment that attracts and retains the right people. I also guide the team on how to enable people understand what we do and how we do it. The biggest percentage of work is done by a team of specialists who understand the subject matter. My job is to coordinate the team, motivate, and give incentives. My interest is not in the time the team reports to or leaves work; it is in whether they have met their targets in the stipulated time.

What is your assessment of the financial sector performance in Uganda?

As FSD Uganda, rating the performance of the financial sector involves answering questions like whether every Ugandan is participating in the financial sector, reaping the benefits of financial intermediation, able to save in a safe and affordable place, have access to payment systems and insurance services, and whether they have access to credit that is suitable for their needs. Considering such areas, there is still a lot more that needs to be done. The target is a deeper, broader and more inclusive financial sector.

What then is FSD’s role in improving financial inclusion in the country?

The British government through the Department for International Development (DFID) in 2012 approved a £17 million programme that involved setting up of the FSD Uganda programme, working under three pillars. The first being policy, legal, and regulatory, which involves working on having an enabling legal framework. We work with regulators, government bodies, Bank of Uganda, Insurance Regulatory Authority, among others to have the right laws and regulations in place to improve access to financial services.

Key among them is the recent Financial Institutions Amendment Act that has allowed in Agency Banking. We are working to ensure we have the right Consumer Protection Act to protect consumers on some services where they are not currently protected such as mobile money.

We also work on innovative financial services and facilitate research in the financial behavior of low income clients and the drivers of the financial sector, which we use to address constraints to financial inclusion.

What about the MoU with Uganda Registration Services Bureau?

Our research showed that the biggest constraint faced by most small businesses is lack of access to credit due to lack of feasible collateral. So we thought we facilitate provision of credit to small businesses by enabling them provide collateral that is movable such as equipment, furniture, and fittings which they cannot pledge to the banks at the moment because they are unacceptable. The purpose of a movable asset registry is to ensure that an asset cannot be pledged more than once to access a loan or credit. This secures a lenders interest until the entire loan is paid off and ultimately this minimises disputes. This framework is operational in Ghana, Nigeria, and Zambia. The government of Uganda has the Chattels Security Act which would enable a registry to be established and be instrumental for small businesses in securing credit. For that, we entered into an MOU with URSB.

What has been done so far?

A consultant is working with URSB to review the laws and give recommendations to ensure the chattels registry becomes operational.

Some properties in the chattel programme are prone to uncertainties like burglary. What measures have you put in place to address such loopholes?

We are only working with URSB to help them implement the registry. Concerning the details of how it will work, URSB has a good system in place to ensure that such issues are addressed. We funded a benchmarking visit of URSB officials to other movable registries in Africa. So where those issues have been considered, they must have learnt and borrowed solutions to address them.

What other strategies have you put in place to block barriers to financial inclusion in Uganda?

Ours is a market developed programme which ensures that pieces in the market can in the long term work sustainably without our assistance. We are not implementers. For instance, following the passing of the Financial Institutions Amendment Act, we are now focusing on working with partners interested in agency banking to help them speed up its implementation. We fund implementers, except for the policy issues where we work with government and semi-government bodies.

What challenges do you encounter in improving financial inclusion?

We are centered around working with partners versus implementing. When you implement directly, you are working on the ground and can see the change quickly. Our FSD Uganda results on the ground are not so visible especially to the beneficiaries. The challenge is to relate the impact of our work directly to us.

What is your projection of the financial sector performance in Uganda in the next few years?

Research has proven that when people have access to financial services, they are able to smoothen shocks in their lives through saving and investment and their lives are in most cases better off than those without; that countries with the highest levels of financial inclusion also have higher levels of economic development. Money or savings in the financial system can be channeled to business enterprises through credit. This has a big multiplier effect on the economy through increased productivity, employment and ultimately higher standards of living.

In the near future, people who don’t have access to finance will not be more than 8% because the rate at which technology is introducing new ways of access to financial services is a very steep curve. However, access alone is not enough; we should also work on usage. There are many dormant mobile money accounts. We want to see a cash-light economy where more money is in the financial system rather than being held elsewhere.


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