Mobile money and SACCOs are key drivers of financial inclusion, new survey finds

However, the number of people storing cash at home for long-term savings has increased from 27% to 44%, indicating possible distrust in formal financial institutions.

Kampala, Uganda | THE INDEPENDENT | According to the latest Finscope survey, mobile money and Savings and Credit Cooperative Organizations (SACCO) have become the main drivers of financial inclusion.

The survey, released on May 15, with the aim of providing information on the behaviours, attitudes and financial barriers faced by Ugandan adults, shows that mobile money services have seen a notable increase in usage, rising from 56% in 2018 at 64%. in 2023.

Similarly, SACCO utilization increased from 5% to 14% during the same period. Commercial banks and other financial institutions have also seen growth, with usage increasing from 11% to 14%.

Despite these advances, challenges remain, particularly in relation to the affordability, relevance and awareness of formal financial services.

The survey highlights a significant reliance on informal savings mechanisms: the proportion of Ugandans saving via mobile phones doubled from 23% in 2018 to 42% in 2023, and bank savings increased slightly from 11% to 15%.

At the same time, the number of people storing cash at home for long-term savings has increased from 27% to 44%, indicating possible distrust in formal financial institutions.

The debt landscape has also evolved, with a shift away from credit, with 44% of respondents borrowing primarily to cover regular expenses. Interestingly, seven out of 10 Ugandans had a personal budget deficit, meaning they need more money than they earn to cover their personal budget.

Additionally, more Ugandans rely on family and friends, personal savings and loans to manage their budget deficits than in 2018, dwarfing formal banking institutions.

In terms of credit from the formal sectors, SACCOs and mobile money each account for 16% of the lending market, while banks have a smaller share of 8%. This dynamic suggests a market opportunity for formal lenders to develop products that meet the specific needs of these communities.

Women excluded from financial services

The report also highlights a disparity in the use of financial services across demographic lines. Men, urban residents and those in formal employment are more likely to use formal financial services, while women, rural residents and informal workers rely more on informal financial solutions. Financial exclusion is more pronounced among women, rural residents and those in the eastern region.

Insurance services have seen modest growth, with formal insurance participation rising from 1% in 2018 to 2% in 2023, despite administrative data suggesting broader coverage of 5%. In particular, informal insurance mechanisms, such as burial societies, have seen a decline.

The survey also sheds light on broader socio-economic trends, such as the significant growth of Uganda’s younger adult population, which poses challenges and opportunities for financial inclusion. The proliferation of mobile phone ownership and Internet access has been marked, although disparities in regional and gender access persist.

FinScope 2023, the fifth of its kind, was implemented by Bank of Uganda in partnership with Financial Sector Deepening Uganda, Uganda Bureau of Statistics (UBOS), aBi – Agricultural Business Initiative, Ministry of Finance, Planning and Development Economic, and several others. concerned parties.

The survey aimed to indicate the state of financial inclusion in Uganda and understand the attitudes and perceptions of Ugandan adults towards money management, financial products and services.