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Uganda’s Know Your Customer (KYC) Policies Raise Concerns Over Financial Inclusion

Kampala, Uganda - Uganda has made significant strides in financial inclusion over the past few years, driven largely by an increase in mobile money usage. However, experts warn that the rise in digital financial services (DFS) has been hampered by Know Your Customer (KYC) requirements imposed by regulators.

Financial Inclusion Milestones

According to a 2016 report by Financial Inclusion Insights Uganda, nearly four out of every ten Ugandan adults now have access to financial services. This includes:

  • 35% holding mobile money accounts
  • 11% having full-service bank accounts

However, the rise in DFS has been accompanied by a decline in adoption, particularly among marginalized groups.

Challenges with KYC Requirements

Industry players say that the lack of clarity around KYC requirements for various DFS users has created confusion and discrepancies in interpretation. This has resulted in lengthy onboarding processes, with excessive paperwork, which has discouraged some individuals from using DFS services.

Impact on DFS Adoption

Research conducted by UNCDF-MM4P found that the strict KYC requirements have had a significant impact on DFS adoption, particularly among:

  • Agents
  • Merchants
  • Refugees

The study revealed that the registration and onboarding process for these groups is often time-consuming and cumbersome, leading to exclusion from DFS services.

Recommendations for Improving KYC Policies

The UNCDF-MM4P research provides recommendations for addressing the challenges posed by KYC policies, including:

  • Clarifying the KYC requirements for different types of DFS users
  • Implementing a more streamlined registration process
  • Providing training and support to financial service providers on KYC compliance

Stakeholders Engage to Address Issues

The UNCDF-MM4P is engaging with regulators, banks, mobile network operators, and other stakeholders to address the issues highlighted in the report. By working together, the parties aim to create a more inclusive DFS environment that promotes financial inclusion while ensuring compliance with regulatory requirements.

Conclusion

As Uganda continues to strive for increased financial inclusion, it is essential that policymakers and industry players work together to address the challenges posed by KYC policies and ensure that digital financial services are accessible to all segments of society.