Financial inclusion: FINCA rides on digital tech to reach the unbanked

By Robert Kakande

Over the past two decades, Uganda has experienced remarkable economic growth fueled by major reforms promoting market-based development. Private investment has surged, new export-oriented industries have emerged, and the poverty rate has declined.

However, this growth has not been evenly distributed. Modern factories and hotels thrive in Kampala and other urban centers, but prosperity has been slow to reach the rural areas, where most of Uganda’s population resides. This urban-rural divide is particularly evident in the financial services sector.

In cities like Kampala, financial institutions and ATMs are common, with international and local banks competing for customers through various offerings and promotions.

Conversely, rural Uganda needs more financial services, and this need is compounded by limited awareness of how these services can improve their live.

As a result, many Ugandans remain outside the formal financial system, limiting their ability to save securely, access credit, or invest in their businesses.

In response to this disparity, FINCA Uganda has stepped up to address these challenges, spearheading a financial revolution through digital technology.

Recognizing the high mobile penetration in Uganda, FINCA has developed a comprehensive mobile banking platform.

This platform allows users to perform various transactions—such as opening accounts,  transferring funds, paying bills, and applying for loans—directly from their phones.

This advancement is especially transformative for those in remote areas where traditional bank branches are scarce.

Additionally, FINCA has expanded its reach through partnerships of agent banking locations such as local shopkeepers and business owners act as agents, providing essential banking services like deposits, withdrawals, and bill payments.

This network not only brings financial services closer to rural communities but also creates new economic opportunities for local entrepreneurs.

As the banking industry embraces digital transformation, traditional bank branches have been reduced, with a growing emphasis on electronic and agent banking services.

This shift reflects a broader trend where financial institutions are increasingly prioritizing digital solutions to enhance customer convenience and financial accessibility.

To address the challenge of limited credit history, FINCA has introduced a digital credit scoring system.

By analyzing alternative data sources such as mobile phone usage and transaction history, FINCA can assess creditworthiness and extend loans to individuals who might otherwise be excluded due to a lack of formal credit history.

Beyond technology, FINCA is committed to financial literacy initiatives.

These programs educate customers on safe digital banking practices, effective financial management, and future planning, ensuring they can fully benefit from the services offered.

A 2022 Bank of Uganda report found that 50.4% of Ugandans had the right financial knowledge and behavior for their circumstances, showing that the level of financial literacy is average.

The impact of FINCA Uganda’s digital initiatives is exemplified by the story of Amina Akello, a small-scale farmer in northern Uganda.

Previously, Akello had to travel long distances to access financial services, taking valuable time away from her farm. With FINCA’s mobile banking platform, she now manages her finances from her phone, saving both time and money.

The agent banking network allows her to deposit earnings and access credit for farm improvements, leading to enhanced yields and a better quality of life for her family.

The journey is ongoing. With sustained investment in technology and financial education, FINCA Uganda aims to reach even more underserved communities, ensuring that everyone, regardless of their location or economic status, has access to essential financial tools.

The writer is the Executive Director at FINCA Uganda, Robert Kakande.