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BUILD AFFORDABLE FINANCIAL SOLUTIONS TO BOOST SAVINGS – BOU

Financial services providers have been urged to build and extend affordable and user friendly green financial solutions to underserved and low-income Ugandans to encourage them to save with formal financial institutions to grow savings in the country.

The appeal was made by the Bank of Uganda Deputy Governor Mr. Michael Atingi-Ego at a media briefing to commemorate the World Savings Day on Monday 31, 2022 at Serena Hotel Kampala.

He noted that saving with a regulated financial institution accrues interest for savers and also ensures safety of funds.

“I appeal to people to save their money with a regulated financial institution. Sacrificing and delaying gratification by saving your hard-earned money and keep it in a pot or under a mattress is like taking one step forward and four steps backwards. It is also full of risks,” Mr. Atingi-Ego said.

The briefing was orgainised by Uganda Institute of Banking and Financial Services (UIBFS), Bank of Uganda and Uganda Bankers Association in partnership with the Insurance Regulatory Authority of Uganda, Deposit Protection Fund, Uganda Retirement Benefits Regulatory Authority, among others. It sought to launch the financial services awareness month and rally Ugandans to start saving with formal institutions for safety and accumulation of their savings.

The Deputy Governor noted that the Financial Capability Survey 2020 showed that only 15% of Ugandans save money in a deposit taking financial institution regulated, 17% save on mobile money platforms, 44% rely on Village Savings and Loan Associations while 42% resort to saving boxes.

“These are the people we need to bring into the system,” he said.

At 13. 48% Uganda has one of the lowest savings-to-Gross Domestic Product (GDP) ratio in the region compared to Kenya’s 23% and Rwanda’s 18%.

“We urge every stakeholder to build an inclusive, vibrant and safe green financial system that will crowd in all those saving money at home,” Mr. Atingi-Ego said.

This year’s theme is “Start Small, Grow Big and Be Green Smart”.

He said theme seeks to inspire the accumulation of savings while preserving the environment.

“Saving money for future goals and protecting the environment are complementary aspects of sustainability. And, just as the time to save money is when one has some, however small the amount; every little step to reduce carbon emissions matters, however global the climate risk,” he said.

Insurance – a viable option

The Insurance Regulatory Authority Director Planning, Research and Market Development, Mr. Protazio Sande urged Ugandans to consider Life Insurance as a tool to save their hard-earned incomes, saying it is affordable and provides safety for their savings.

He said that at only UGX50,000 a month or UGX2,000 a day, one can get a life insurance policy.

“As IRA, our mandate is to ensure that when you save this money with an insurance company, the money is safe. Our number one mandate is policyholder protection.

“We have a strong regulatory regime, adopted risk-based supervision and discussions on the establishment of a policyholder compensation fund are in advanced stages. All this is intended to offer different layers of protection to funds that people save with insurance companies,” Mr. Sande said.

He further noted players in the Life Insurance space have several innovative products that meet people’s evolving savings needs. He gave an example of the  children’s education policy that allow parents to save for their children’s education.

He urged the public to always save before spending. “If you say you want to save after speeding, you will be lying yourself. Saving is a culture and insurance provides that opportunity to save before consumption,” he said.

The Uganda Insurers’ Association Chief Executive Officer Mr. Jonan Kisakye also urged Ugandans to embrace life insurance as a savings tool, noting that it will not only enable them to save but also take care of the risk component. In case of death of the policyholder for instance, beneficiaries receive a cash payout.

Savings lower borrowing rates

The Uganda Bankers Association Executive Director Mr. Wilbrod Owor also urged financial services provers including banks, insurers and financial technology companies (Fintechs) to mobilise savings from the informal sector, which largely saves in boxes, ports and under mattresses.

He noted that effective mobilisation of these savings into the mainstream financial system lowers the cost of borrowing and oil economic growth.

Mr Owor, however, urged all stakeholders to put in place secure infrastructure systems to safeguard people’s savings, noting that anything below that erodes public confidence in the formal financial system.

He alluded that the outbreak of pandemics in the recent past, especially Covid-19 confirmed the importance of saving for a rainy day.

The Director, Legal Services & Board Secretary at Uganda Retirement Benefits Regulatory Authority Ms. Rita Nansasi Wasswa also alluded to the need for Ugandans to save for their retirement to avoid old-age poverty.

While Uganda has a working population of 15.9 million people, only 18% save with a licensed benefits retirement scheme, according to the Uganda Retirement Benefits Regulatory Authority (URBRA). Majority of Ugandans either do not save or save informally in pots, boxes or under their mattresses.

“Everyone, including those in the informal sector, can save for their retirement through any licensed retirement benefits scheme. You can start small, with as little as UGX2,000. We assure you that these savings are prudently invested,” she said.

“The theme reminds us that you don’t have to earn a lot to save for retirement, start now, small and then you grow your savings over time,” she said.

The month of November was also dedicated as an annual banking and financial services awareness month. A series of activities have been lined up for this month including radio talk-shows, webinars covering the eight financial literacy pillars – a savings, personal financial management, investment, loans, retirement, insurance, taxation, and digital finance. 

There will also be a savings challenge where institutions will set goals and save towards achieving them.

The UIBFS Chief Executive Officer Ms. Goretti Masadde noted that the banking and financial services awareness month seeks to among others change people’s attitudes towards saving.

“Everyone can and should save. Start with the little you have and you will be amazed at how much you would have accumulated at the end of your set period,” Ms. Masadde said.