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Inclusive financing: Uganda needs to strengthen existing laws

Globally, Young people are facing difficulties to access financial services. Statistics show that young people access financial services at roughly half the rate of adults.  According to the World Bank’s Global Findex database, youth are 40% less likely to save at banks and 60% less likely to have borrowed. Without these services, young people have fewer means to manage their assets, invest in education, or grow businesses.

In Uganda, the existing laws do not provide incentives or regulations to support inclusive financial services. Many formal financial institutions do not actively seek to reach hard to reach groups such as youth nor are they required to develop new products that embrace vulnerable groups.

Citing the Contracts Act, 2010, Ssanyu Rebecca, a Social Policy analyst, says the Act provides for capacity to contract people of sound mind ageing eighteen years and above. However, this is contrary to article 34 (4) and (5) of the Uganda’s Constitution, which states that a person of sixteen years or above has the capacity to contract.   It should be noted that Banks and other financial institutions including mobile money services treat accounts opening and other forms of money transacting as contracts and use the Contracts law as basis for excluding youth below 18 years.

With this barrier, the National Multi-stakeholder workshop on Youth Financial Inclusion held on November 7, 2018, in Kampala resolved to take urgent action to tackle the unprecedented youth employment crisis through a multi-pronged approach geared towards pro-employment growth and setting up pathways for effective and efficient youth access to financial services.

The Resolution: “A call for action: The government and other concerned parties should make amendment in financial laws to allow youth aged 15-17 to open savings accounts in their own right by December 2019,”

Participants also call for financial service providers and saving groups promoters to increase young people’s access to appropriate savings, credit, payment, and insurance products.  At the same time, they requested all financial institutions to offer financial education and life-skills training and information to youth to boost their financial capability. 

Ms Ssanyu explains that Uganda has no policy that addresses every aspect of youth financial inclusion in isolation at a go. Policies, laws and regulatory provisions must be seen to be used to reinforce each other. She says one law or policy should not reverse a favourable provision in another law or policy. “For instance, the law of the land prohibits child labour, but how can the youth segment of 17 and below who are still children partake in financial services if they cannot work or not economically active.” She says. This calls for efforts to continue harmonizing the policy environment. She urges partners to embrace financial inclusion because it carries a social protection issue for the youth. There are a number of innovative approaches to promote financial inclusion which in turn increase livelihood opportunities for youth in Uganda. Innovation in financial inclusion begins by understanding the strengths and weaknesses of existing financial structures/frameworks and how youth interact with financial systems. Understanding interactions will lead to improvements in financial services e.g through diversifying existing products, creating new ones, creating a conducive regulatory environment.

Some aspects of youth financial inclusion/access to finance include:

  • Access to formal financial services
  • Expanding outreach and scope of financial services
  • Financial literacy and other training
  • Leveraging social network technologies
  • Innovative ICT technologies
  • Agency banking
  • Access to information
  • Regulatory challenges and constraints
  • Delivery models
  • Scale and sustainability