Uganda’s Know-Your-Customer Regulations Struggle to Keep Pace with Financial Inclusion

Uganda has made significant strides in financial inclusion over the past couple of years, with mobile money driving this growth. According to recent insights, nearly 40% of Ugandan adults now have access to financial services, with:

35% having a mobile money account
11% a full-service bank account
6% an account in a non-bank financial institution

However, this growth is threatened by the Know-Your-Customer (KYC) regulations that are supposed to ensure compliance. The requirements are often unclear, leading to discrepancies in interpretation among financial service providers.

The Challenges of KYC Regulations

Lengthy onboarding processes for customers
Many being excluded from using digital financial services

To understand these challenges, UNCDF-MM4P conducted research on the specific KYC requirements for DFS players in Uganda. The exercise aimed to clarify the requirements for opening and operating DFS accounts, including those for:

Individuals
Informal merchants and traders
Formal businesses
Non-citizens such as refugees

Research Findings

The research found that financial service providers are struggling to interpret and implement KYC requirements, leading to a negative impact on DFS adoption. The report highlights the need for more clarity around KYC requirements, particularly for different types of users.

Addressing the Challenges

UNCDF-MM4P is engaging with stakeholders to foster DFS growth and uptake. The organization believes that by addressing the issues highlighted in the report, Uganda can ensure that its financial inclusion efforts are not hindered by unclear regulations.

By clarifying KYC requirements and ensuring that they are user-friendly, Uganda can:

Increase DFS adoption
Improve financial inclusion
Ensure that more people have access to financial services