Uganda’s Ongoing Battle to Encourage Savings

by Christopher Kiiza
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Acquiring positive savings habits is among the most effective methods to assume control over your financial well-being.

However, many individuals often discover that despite having sufficient funds for their immediate expenses, they struggle to set aside money for savings. Given the prevailing economic hardships, you might be contemplating the ideal moment to initiate your savings journey.

In 2016, Uganda joined global commemorations to celebrate World Savings Day, which is observed annually on 31st October, since 1924, to educate people worldwide about the importance of saving their money in regulated financial institutions rather than keeping it hidden away or in savings boxes.

Since then, stakeholders that include Bank of Uganda, the Uganda Institute of Banking and Financial Services (UIBFS), the Uganda Bankers Association, the Deposit Protection Fund (DPF), financial sector regulatory institutions, financial service providers, development partners, and other stakeholders have been calling upon savers in the country, regardless of socioeconomic status, to consider entrusting their savings to regulated financial institutions.

Regulated financial service providers ensure the security of customer savings and help to preserve value by paying interest on the deposits.

Regulated financial institutions often offer competitive interest rates, helping your savings grow over time. They also provide access to various financial products and services that can assist you in reaching your financial goals, from savings accounts to investment opportunities.

However, the 2020 Financial Capability Survey conducted by Bank of Uganda shows that a large number of Ugandans save informally.

The survey indicates that only 15% of Ugandans save their money in deposit-taking financial institutions regulated by the Bank of Uganda, 44% rely on village savings and loans associations while 42% rely on savings boxes at home.

The Bank of Uganda Deputy Governor, Michael Ating-Ego says the primitive ways of saving money such under the beds, or pots cannot earn a saver any interest unlike money that is fixed in a regulated financial institution.

“Saving money without earning a reasonable return, e.g., in a pot or under a mattress, is unwise because the amount stays fixed while the prices of goods and services typically keep increasing year in and year out. And if we accept that ‘money is what money does’, the money in a pot does less and less as time goes by,” he said.

As Uganda joins the rest of the world to mark World Savings Day, Ating-Ego says the only way to preserve and grow the value of your money is to earn a return greater than inflation.

“To do this, save your money in formal and regulated financial institutions, such as commercial banks, credit institutions, and microfinance deposit-taking institutions, which the Bank of Uganda regulates,” the Deputy Governor advises Ugandans.

The 2020 Financial Capability Survey also revealed that approximately 50% of Ugandans saved money. Of those who saved, 40% did so for immediate consumption, while only 20% saved towards specific life goals, such as owning a house.

This shows that Uganda still has a low saving culture. Saving is a culture that everyone (whether rich or poor) should adopt.

One of the best ways to take charge of finances is to acquire healthy saving habits.

The survey findings also indicated that 17% save on their phones using mobile money.

Ating-Ego says digitalisation is making saving and accessing other financial services increasingly available to everyone through various formal tools tailored to different categories of users.

“Digital technology, such as mobile phones and other devices, is solving the issue of efficiently accessing the unbanked population, who often lack access to physical bank branches in remote areas. Accordingly, the BoU collaborates with stakeholders such as payment service providers and operators, FinTechs, regulators like the Uganda Communications Commission, and development partners to innovate and expand digital financial services, products, and phone and internet connectivity nationwide.”

As Uganda marks World Savings Day, the Deputy Governor has urged the public to keep their money in the digital financial system.

“After saving your cash in financial institutions through various means, including mobile money, we encourage you not to withdraw (or “cash-out”) your money but keep earning interest on your digital accounts, executing payments, and accessing micro-credit and micro-insurance services. Digitalisation offers the most effective means of providing financial services to all Ugandans, many outside the money economy,” he said.

The Central and stakeholders will soon unveil the National Financial Inclusion Strategy for 2023-2028, with several strategic initiatives to enhance access to and usage of financial services, including savings.

The strategy aims to: reduce financial exclusion and access barriers to formal financial services, expand the use of high-quality and affordable formal financial products, including savings, bolster financial consumer protection and capability, raise consumer awareness of financial products and services, develop an inclusive green finance market, and promote gender-inclusive finance with a focus on women’s economic empowerment.

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